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The Social Media Externality

Author

Listed:
  • Markovich, Sarit
  • Rayo, Luis

Abstract

We develop a framework for understanding how social media can reduce both motivation and well-being. In the model, curated social-media feeds raise the bar for feeling successful and distort how people learn about their capability from their own outcomes. Individuals then work toward an unrealistic standard and misread poor results as evidence of low capability rather than as a consequence of biased comparisons. The result is a motivation trap in which pessimistic beliefs and low effort reinforce one another over time. The same mechanism also reduces well-being by making rewarding moments less frequent. Finally, the model explains why social media can amplify preexisting motivational inequality and why competence-building interventions are especially promising.

Suggested Citation

  • Markovich, Sarit & Rayo, Luis, 2026. "The Social Media Externality," CEPR Discussion Papers 21432, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:21432
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    File URL: https://cepr.org/publications/DP21432
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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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