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

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. ( JEL D12, D22, D62, L86 )