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Influencer Cartels

Author

Listed:
  • Marit Hinnosaar
  • Toomas Hinnosaar

Abstract

Social media influencers account for a growing share of marketing worldwide. We demonstrate the existence of a novel form of market failure in this advertising market: influencer cartels, where groups of influencers collude to increase their advertising revenue by inflating their engagement. Our theoretical model shows that influencer cartels can improve consumer welfare if they expand social media engagement to the target audience, or reduce welfare if they divert engagement to less relevant audiences. Drawing on the model's insights, we empirically examine influencer cartels using novel datasets and machine learning tools, and derive policy implications.

Suggested Citation

  • Marit Hinnosaar & Toomas Hinnosaar, 2024. "Influencer Cartels," Papers 2405.10231, arXiv.org, revised Nov 2024.
    • Handle: RePEc:arx:papers:2405.10231
    as

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    References listed on IDEAS

    as
    1. Chaim Fershtman & Ariel Pakes, 2000. "A Dynamic Oligopoly with Collusion and Price Wars," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 207-236, Summer.
    2. Marhsall, Robert C. & Marx, Leslie M., 2014. "The Economics of Collusion: Cartels and Bidding Rings," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262525941, April.
    3. Robert H. Porter, 1983. "A Study of Cartel Stability: The Joint Executive Committee, 1880-1886," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 301-314, Autumn.
    4. Dave Donaldson & Adam Storeygard, 2016. "The View from Above: Applications of Satellite Data in Economics," Journal of Economic Perspectives, American Economic Association, vol. 30(4), pages 171-198, Fall.
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    More about this item

    JEL classification:

    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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