Working Paper: NBER ID: w24514
Authors: Erik Brynjolfsson; Felix Eggers; Avinash Gannamaneni
Abstract: GDP and derived metrics (e.g., productivity) have been central to understanding economic progress and well-being. In principle, the change in consumer surplus (compensating expenditure) provides a superior, and more direct, measure of the change in well-being, especially for digital goods, but in practice, it has been difficult to measure. We explore the potential of massive online choice experiments to measure consumers’ willingness to accept compensation for losing access to various digital goods and thereby estimate the consumer surplus generated from these goods. We test the robustness of the approach and benchmark it against established methods, including incentive compatible choice experiments that require participants to give up Facebook for a certain period in exchange for compensation. The proposed choice experiments show convergent validity and are massively scalable. Our results indicate that digital goods have created large gains in well-being that are missed by conventional measures of GDP and productivity. By periodically querying a large, representative sample of goods and services, including those which are not priced in existing markets, changes in consumer surplus and other new measures of well-being derived from these online choice experiments have the potential for providing cost-effective supplements to existing national income and product accounts.
Keywords: consumer surplus; digital goods; wellbeing; choice experiments; GDP
JEL Codes: E01; E16; O0; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| digital goods (H82) | consumer surplus (D46) |
| digital goods (H82) | consumer welfare (D69) |
| changes in access to digital goods (D16) | consumer welfare (D69) |
| willingness to accept compensation for losing access to digital goods (D16) | consumer welfare (D69) |
| median WTA for Facebook access (L96) | consumer surplus (D46) |
| sensitivity of WTA to price changes (D41) | consumer surplus (D46) |
| changes in consumer surplus from digital goods (D11) | wellbeing (I31) |