A Model of Influencer Economy / Lin William Cong, Siguang Li.

By:

Cong, Lin William

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w31243.Publication details: Cambridge, Mass. National Bureau of Economic Research 2023.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: With the rise of social media and streaming platforms, firms and brand-owners increasingly depend on influencers to attract consumers, who care about both common product quality and consumer-influencer interaction. Sellers thus compete in both influencer and product markets. As outreach and distribution technologies improve, influencer payoffs and income inequality change non-monotonically. More powerful influencers sell better-quality products, but pluralism in style mitigates market concentration by effectively differentiating consumer experience. Influencer style dispersion substitutes horizontal product differentiation but serves as either complement (small dispersion) or substitute (large dispersion) to vertical product differentiation. The assortative matching between sellers and influencers remains under endogenous influence-building, with the maximal differentiation principle recovered in the limit of costless style acquisition. Meanwhile, influencers may under-invest in consumer outreach to avoid exacerbating price competition. Finally, while requiring balanced seller-influencer matching can encourage seller competition, uni-directional exclusivity can improve welfare for sufficiently differentiated products and uncrowded influencer markets.

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Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w31243 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

May 2023.

With the rise of social media and streaming platforms, firms and brand-owners increasingly depend on influencers to attract consumers, who care about both common product quality and consumer-influencer interaction. Sellers thus compete in both influencer and product markets. As outreach and distribution technologies improve, influencer payoffs and income inequality change non-monotonically. More powerful influencers sell better-quality products, but pluralism in style mitigates market concentration by effectively differentiating consumer experience. Influencer style dispersion substitutes horizontal product differentiation but serves as either complement (small dispersion) or substitute (large dispersion) to vertical product differentiation. The assortative matching between sellers and influencers remains under endogenous influence-building, with the maximal differentiation principle recovered in the limit of costless style acquisition. Meanwhile, influencers may under-invest in consumer outreach to avoid exacerbating price competition. Finally, while requiring balanced seller-influencer matching can encourage seller competition, uni-directional exclusivity can improve welfare for sufficiently differentiated products and uncrowded influencer markets.