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Variety-Based Congestion in Online Markets: Evidence from Mobile Apps

  • Daniel Ershov
American Economic Journal: Microeconomics
vol. 16, no. 2, May 2024
(pp. 180-203)
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Abstract

In many online markets, consumers have to spend time and effort browsing through products. The addition of new products could make other products less visible, creating congestion externalities. Using Android app store data, I take advantage of a natural experiment—a redesign of part of the store—to show evidence of congestion externalities online: more apps in the market directly reduce per app usage/downloads. The natural experiment also increases long-run entry, but a structural demand model that accounts for congestion externalities suggests that 40 percent of consumer variety welfare gains are lost from higher congestion.

Citation

Ershov, Daniel. 2024. "Variety-Based Congestion in Online Markets: Evidence from Mobile Apps." American Economic Journal: Microeconomics, 16 (2): 180-203. DOI: 10.1257/mic.20200347

Additional Materials

JEL Classification

  • D12 Consumer Economics: Empirical Analysis
  • D22 Firm Behavior: Empirical Analysis
  • D62 Externalities
  • L86 Information and Internet Services; Computer Software
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