When Product Markets Become Collective Traps: The Case of Social Media

Leonardo Bursztyn, Benjamin R. Handel, Rafael Jimenez and Christopher Roth

No 31771, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Individuals might experience negative utility from not consuming a popular product. With such externalities to non-users, standard consumer surplus measures, which take aggregate consumption as given, fail to appropriately capture consumer welfare. We propose an approach to account for these externalities and apply it to estimate consumer welfare from two social media platforms: TikTok and Instagram. Incentivized experiments with college students indicate positive welfare based on the standard measure, but negative welfare when accounting for these non-user externalities. Our findings highlight the existence of product market traps, where large shares of active users prefer each platform not to exist.

JEL-codes: D62 D91 (search for similar items in EconPapers)
Date: 2023-10
New Economics Papers: this item is included in nep-cul, nep-ipr, nep-pay, nep-soc and nep-upt
Note: IO PE POL
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Citations: View citations in EconPapers (8)

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