When Product Markets Become Collective Traps: The Case of Social Media
Leonardo Bursztyn, Benjamin Handel, Rafael Jiménez-Durán, Christopher Roth
American Economic Review · 2025 · Volume 115 · Issue 12
Abstract
Individuals might experience negative utility from not consuming a popular product. With such externalities to nonusers, 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 nonuser externalities. Our findings highlight the existence of product market traps, where active users of a platform prefer it not to exist.
Keywords
Externalities, Search, Learning, Information and Knowledge, Communication, Belief, Unawareness, Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making, Entertainment, Media, Economic Sociology, Economic Anthropology, Language, Social and Economic Stratification
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