Influencer Cartels

60 Pages Posted: 18 Feb 2021 Last revised: 16 May 2024

See all articles by Marit Hinnosaar

Marit Hinnosaar

University of Nottingham

Toomas Hinnosaar

University of Nottingham - School of Economics

Date Written: May 16, 2024

Abstract

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. We validate the model empirically using novel data on influencer cartels combined with machine learning tools, and derive policy implications for how to maximize consumer welfare.

Keywords: influencers, marketing, collusion, Natural Language Processing, Large Language Models, Latent Dirichlet Allocation

JEL Classification: L82, M31, D26, L14

Suggested Citation

Hinnosaar, Marit and Hinnosaar, Toomas, Influencer Cartels (May 16, 2024). Available at SSRN: https://ssrn.com/abstract=3786617 or http://dx.doi.org/10.2139/ssrn.3786617

Marit Hinnosaar (Contact Author)

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Toomas Hinnosaar

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

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