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

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  • Daniel Ershov

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.

Suggested Citation

  • Daniel Ershov, 2024. "Variety-Based Congestion in Online Markets: Evidence from Mobile Apps," American Economic Journal: Microeconomics, American Economic Association, vol. 16(2), pages 180-203, May.
    • Handle: RePEc:aea:aejmic:v:16:y:2024:i:2:p:180-203
    DOI: 10.1257/mic.20200347
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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