Social Media and Consumers’Countervailing Power: The Cottage Cheese Boycott Igal Hendely Saul Lachz Northwestern University The Hebrew University and CEPR Yossi Spiegelx Tel Aviv University, CEPR, and ZEW July 20, 2014 Abstract Israel via Facebook, prompted by steep price increases after price controls were lifted in 2006. Prices immediately declined and stayed at a lower level. We …nd that (i) cross price elasticities substantially increased, (ii) demand declined more and own price elasticities increased more in areas where proxies for social media were high, suggesting the importance of social media mobilizing consumers. Increased elasticities cannot fully explain the observed price decline; …rms lowered prices because of fears of the boycott spreading to other products and of government intervention. JEL classi…cation numbers: L1, D12 Keywords: consumer boycott, social media, price elasticities We thank Andrea Ichino, Tim Feddersen, Manuel Trajtenberg, Frank Verboven, Christine Zulehner and seminar participants at the Hebrew Univesrsity, the 2014 “The Economics of Information and Communications Technologies” conference in Paris, the 2014 IIOC meetings in Chicago, the JIE-CEPR applied Industrial Organization in Athens, and the 2014 Economics of ICT conference in Mannheim for useful comments. We also thank Dan Aks and Max Bocharenko for excellent research assistance. Saul Lach grate¤ully acknowledges …nancial support by The Israel Science Foundation (Grant No. 858/11) and by the Wolfson Family Charitable Trust. yDepartment of Economics, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208, e-mail:
[email protected]. zDepartment of Economics, The Hebrew University, Jerusalem 91905, Israel, e-mail:
[email protected]. xRecanati Graduate School of Business Administration, Tel Aviv University, Ramat Aviv, Tel Aviv, 69978, Israel.