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

Author

Listed:
  • Leonardo Bursztyn
  • Benjamin Handel
  • Rafael Jiménez-Durán
  • Christopher Roth

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.

Suggested Citation

  • Leonardo Bursztyn & Benjamin Handel & Rafael Jiménez-Durán & Christopher Roth, 2025. "When Product Markets Become Collective Traps: The Case of Social Media," American Economic Review, American Economic Association, vol. 115(12), pages 4105-4136, December.
    • Handle: RePEc:aea:aecrev:v:115:y:2025:i:12:p:4105-36
    DOI: 10.1257/aer.20231468
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    Cited by:

    1. is not listed on IDEAS
    2. Beknazar-Yuzbashev, George & Jiménez Durán, Rafael & McCrosky, Jesse & Stalinski, Mateusz, 2025. "Toxic content and user engagement on social media: Evidence from a field experiment," Working Papers 359, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    3. Anina Harter, 2025. "Legislative institutions and distributive politics: Evidence from Germany’s federal budget committee," Berlin School of Economics Discussion Papers 0075, Berlin School of Economics.
    4. Ruben Enikolopov & Maria Petrova & Gianluca Russo & David Yanagizawa-Drott, 2024. "Socializing Alone: How Online Homophily Has Underminded Social Cohesion in the US," CESifo Working Paper Series 11375, CESifo.
    5. Briglauer, Wolfgang & Krämer, Jan & Palan, Nicole, 2024. "Socioeconomic benefits of high-speed broadband availability and service adoption: A survey," Telecommunications Policy, Elsevier, vol. 48(7).
    6. Felix Chopra & Ingar K. Haaland & Fabian Roeben & Christopher Roth & Vanessa Sticher, 2025. "News Customization with AI," CESifo Working Paper Series 12121, CESifo.
    7. Juan S. Morales & Anne E. Wilson, 2025. "Partisan Conflict on Social Media: Empirical Evidence and Policy Challenges," EconPol Forum, CESifo, vol. 26(04), pages 52-57, October.
    8. Leonardo Bursztyn & Rafael Jiménez-Durán & Aaron Leonard & Filip Milojević & Christopher Roth, 2025. "Non-User Utility and Market Power: The Case of Smartphones," NBER Working Papers 33642, National Bureau of Economic Research, Inc.
    9. Leonardo Bursztyn & Matthew Gentzkow & Rafael Jiménez-Durán & Aaron Leonard & Filip Milojević & Christopher Roth, 2025. "Measuring Markets for Network Goods," ECONtribute Discussion Papers Series 363, University of Bonn and University of Cologne, Germany.
    10. Beknazar-Yuzbashev, George & Jiménez-Durán, Rafael & McCrosky, Jesse & Stalinski, Mateusz, 2025. "Toxic Content and User Engagement on Social Media: Evidence from a Field Experiment," CAGE Online Working Paper Series 741, Competitive Advantage in the Global Economy (CAGE).
    11. Maurizio Pugno, 2024. "Social media effects on well‐being: The hypothesis of addiction of a new variety," Kyklos, Wiley Blackwell, vol. 77(3), pages 690-704, August.
    12. Aarushi Kalra, 2025. "Hate in the Time of Algorithms: Evidence on Online Behavior from a Large-Scale Experiment," Papers 2503.06244, arXiv.org.
    13. Maurizio Pugno, 2024. "Creativity, well-being, and economic development: An evolutionary approach," Journal of Evolutionary Economics, Springer, vol. 34(1), pages 205-225, January.
    14. Sinan Aral & Seth G Benzell & Avinash Collis & Christos Nicolaides, 2025. "Measuring Social Media Network Effects," Papers 2507.04545, arXiv.org.
    15. Donati, Dante & Durante, Ruben & Sobbrio, Francesco & Zejcirovic, Dijana, 2025. "Lost in the net? Broadband internet and youth mental health," Journal of Health Economics, Elsevier, vol. 103(C).
    16. Guy Aridor & Rafael Jiménez-Durán & Ro'ee Levy & Lena Song, 2024. "Experiments on Social Media," CESifo Working Paper Series 11275, CESifo.
    17. Næss, Ole-Andreas Elvik, 2025. "Investigative journalism: Market failures and government intervention through public broadcasters," Journal of Economic Behavior & Organization, Elsevier, vol. 229(C).
    18. Guy Aridor & Rafael Jiménez-Durán & Ro'ee Levy & Lena Song, 2024. "The Economics of Social Media," Journal of Economic Literature, American Economic Association, vol. 62(4), pages 1422-1474, December.
    19. Martin Beraja & Noam Yuchtman, 2025. "Generalized Disruption: Society, Work, and Property Rights in the Age of AI," NBER Chapters, in: The Political Economy of Artificial Intelligence, National Bureau of Economic Research, Inc.
    20. Zhi Hao Lim, 2025. "To Each Their Own: Heterogeneity in Worker Preferences for Peer Information," Papers 2508.06162, arXiv.org.
    21. George Beknazar-Yuzbashev & Rafael Jiménez-Durán & Jesse McCrosky & Mateusz Stalinski, 2025. "Toxic Content and User Engagement on Social Media: Evidence from a Field Experiment," CESifo Working Paper Series 11644, CESifo.
    22. Ingar Haaland & Christopher Roth & Stefanie Stantcheva & Johannes Wohlfart, 2024. "Measuring What Is Top of Mind," CEBI working paper series 24-10, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    23. Alexey Makarin & Simona Mandile, 2025. "Social Media and Mental Health: The Role of Algorithms and Regulation," EconPol Forum, CESifo, vol. 26(04), pages 63-67, October.
    24. Beknazar-Yuzbashev, George & Jiménez-Durán, Rafael & McCrosky, Jesse & Stalinski, Mateusz, 2025. "Toxic Content and User Engagement on Social Media : Evidence from a Field Experiment," The Warwick Economics Research Paper Series (TWERPS) 1543, University of Warwick, Department of Economics.

    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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