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Non-User Utility and Market Power: The Case of Smartphones

Author

Listed:
  • Leonardo Bursztyn

    (University of Chicago & NBER)

  • Rafael Jiménez-Durán

    (Bocconi University, IGIER & Chicago Booth Stigler Center)

  • Aaron Leonard

    (University of Chicago)

  • Filip Milojević

    (University of Chicago)

  • Christopher Roth

    (University of Cologne, NHH, Max Planck Institute for Research on Collective Goods, IZA & CEPR)

Abstract

Firms can increase the demand for their products and consolidate their market power by increasing their users’ utility but also by strategically decreasing the utility of competing products’ users. We study this mechanism in the smartphone market, analyzing Apple’s strategy of differentiating messages sent to Androids with “green bubbles.” In surveys with U.S. college students, we show that green bubbles are widely stigmatized and that a majority of both iPhone and Android users would prefer green bubbles to no longer exist. An incentivized deactivation experiment reveals that iPhone users have a significant willingness to pay to prevent their messages from appearing as green bubbles on other iPhones. Finally, we examine the market implications and document that removing green bubbles substantially increases respondents’ likelihood of choosing an Android over an iPhone.

Suggested Citation

  • Leonardo Bursztyn & Rafael Jiménez-Durán & Aaron Leonard & Filip Milojević & Christopher Roth, 2025. "Non-User Utility and Market Power: The Case of Smartphones," ECONtribute Discussion Papers Series 360, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:360
    as

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    File URL: https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_360_2025.pdf
    File Function: Second version, 2025
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    References listed on IDEAS

    as
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    6. Gorkem Bostanci & Pinar Yildirim & Kinshuk Jerath, 2023. "Negative Advertising and Competitive Positioning," Management Science, INFORMS, vol. 69(4), pages 2361-2382, April.
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    8. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 31, pages 1967-2072, Elsevier.
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    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • 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
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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