Consumer Demand and Market Competition with Time-Intensive Goods

Lancelot de Frahan, Joseph Goodman, Justin Holz, John List, Evan McKay, Niall McMenamin, Magne Mogstad, Sally Sadoff and Hal Sider

Framed Field Experiments from The Field Experiments Website

Abstract: We leverage Becker's time allocation theory to examine consumer demand and market competition for time-intensive goods. The Beckerian model predicts higher diversion ratios for goods with substantial time shares and those with high time costs relative to monetary prices. Applying this model to data from two field experiments, we analyze demand for Facebook and Instagram, focusing on substitution patterns across online activities and offline time use. Our findings indicate that users exhibit low elasticity to ad load, the primary user cost, and that time shares and time costs significantly influence diversion ratios. We explore the implications for user costs and benefits on these platforms and assess the potential impact of a Federal Trade Commission-proposed de-merger of Facebook and Instagram.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:feb:framed:00828

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