We collect data from fifty top Instagram influencers in Germany and Spain from 2014 to 2019. Germany experienced changes in disclosure regulation for social media sponsorship during the sample period. Using a difference-in-difference approach, we study the impact of the the rules on the content of posts and the nature of interaction of followers with the posts. On the content side, we measure whether posts include suggested disclosure terms and show variable but substantial adoption of disclosure. We use an approach based on a fixed list of words associated with sponsorship (i.e. links, mentions of brands, use of words like "sale") as well as natural language processing to assess the likelihood that a post is sponsored. We show that sponsored content use may have increased after changes in disclosure and that followers may have been negatively affected. On the other hand, there is evidence that consumers’ reaction to sponsored posts, measured by likes, may be quite different under stricter disclosure rules, suggesting that the rules could have a substantial impact on information transmission.
Motivated by markets for “expertise,” we study a bandit model where a principal chooses between a safe and risky arm. A strategic agent controls the risky arm and privately knows whether its type is high or low. Irrespective of type, the agent wants to maximize duration of experimentation with the risky arm. However, only the high type arm can generate value for the principal. Our main insight is that reputational incentives can be exceedingly strong unless both players coordinate on maximally inefficient strategies on path. We discuss implications for online content markets, term limits for politicians and experts in organizations.
Music Reviews and Music Demand: Evidence from Pitchfork (with Luis Cabral and April Franco, draft coming soon)
Since 2003, the website Pitchfork classifies three new albums as "Best New Music" (BNM). We examine the effect on music demand of this form of expert advice. Based on a Fuzzy Regression Discontinuity design, we estimate (with statistical precision) that BNM certification increases the number of listeners by four-fold and the number of plays by six-fold. A series of robustness checks suggest that these are causal effects of the BNM seal that go beyond intrinsic album quality and quality scores by other critics.