When Product Markets Become Collective Traps: The Case of Social Media
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.
-
-
Copy CitationLeonardo Bursztyn, Benjamin R. Handel, Rafael Jimenez, and Christopher Roth, "When Product Markets Become Collective Traps: The Case of Social Media," NBER Working Paper 31771 (2023), https://doi.org/10.3386/w31771.Download Citation
-
Published Versions
Leonardo Bursztyn & Benjamin Handel & Rafael Jiménez-Durán & Christopher Roth, 2025. "When Product Markets Become Collective Traps: The Case of Social Media," American Economic Review, vol 115(12), pages 4105-4136.
Related
Mentioned in the News
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals—the NBER Reporter, the NBER Digest, the Bulletin on Health, the Bulletin on the Economics of Alzheimer's, and the Bulletin on Entrepreneurship—as well as research spotlights, lectures, and panel videos.
