American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
When Product Markets Become Collective Traps: The Case of Social Media
American Economic Review
(pp. 4105–36)
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.Citation
Bursztyn, Leonardo, Benjamin Handel, Rafael Jiménez-Durán, and Christopher Roth. 2025. "When Product Markets Become Collective Traps: The Case of Social Media." American Economic Review 115 (12): 4105–36. DOI: 10.1257/aer.20231468Additional Materials
JEL Classification
- D62 Externalities
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
- L82 Entertainment; Media
- Z13 Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification