Research
Research and working papers by Jan Fasnacht.
Non-User Externalities and Market Power
Firms can increase the demand for their products and consolidate their market power by increasing their users' utility but also by strategically creating negative externalities for competing products' users. We study this mechanism in the smartphone market, analyzing Apple’s strategy of marking messages to Android users with distinctive “green bubbles.” In surveys with U.S. college students, we show that green bubbles are widely stigmatized and that a majority of both iPhone and Android users would prefer they were removed. An incentivized deactivation experiment reveals that iPhone users require substantial compensation to have their messages appear as green bubbles on other iPhones. Exploiting uncertainty around the DOJ case against Apple, we show that removing green bubbles shifts choices from iPhone to Android. Finally, we document the prevalence of non-user externalities and analyze their implications across a variety of product features.
Non-User Externalities
We review an emerging literature on how non-user externalities—the benefits or harms that product adoption imposes differentially on non-users versus users—shape market outcomes. A key distinction is that those harmed by classic externalities cannot mitigate harm by joining the externality-producing activity, whereas those harmed by negative non-user externalities can—simply by becoming users. This can expand the harm borne by remaining non-users, generating cascade dynamics that can culminate in product market traps: situations in which individuals would prefer the product not to exist, yet nonetheless choose to adopt it rather than remaining non-users. Using new survey evidence covering 25 product markets, we document that negative non-user externalities are pervasive, that the mechanisms behind them differ systematically across products, and that they generate adoption pressure on non-users. We then discuss how non-user externalities affect welfare analysis, firms’ strategic incentives, and market structure. We conclude by discussing policy responses, including design regulation and collective coordination mechanisms.
Threshold Disclosure in Collective Decisions
Voting-based collective decisions are typically made either anonymously or publicly. Anonymous voting protects truthful expression but conceals individual behavior; public voting provides information about individual votes, but, when one option is socially stigmatized, it can distort participation and choices. We introduce threshold majority voting, in which voters choose a disclosure threshold determining whether and when their votes are revealed. In an experiment at UC Berkeley on the participation of transgender women in women's sports, public voting nearly doubles abstention and reduces support for the stigmatized option. Threshold voting eliminates these distortions while revealing one-third of individual votes.
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