Influencer Cartels
This addresses a novel market failure in influencer marketing, with implications for policy and consumer welfare.
The paper identifies influencer cartels as a market failure in social media advertising, where groups collude to inflate engagement, and shows through a theoretical model that these cartels can either improve or reduce consumer welfare depending on audience targeting.
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.