No Easy Way Out? Platform-Mediated Political Externalities and Platform Strategy

Digital content-sharing platforms manage network effects by affecting user access and behavior but in the process also generate non-pecuniary externalities. We focus on platform-mediated political externalities—that is, changes in political interactions among political agents due to platforms’ intermediation activities. We develop a theoretical framework that explains the origins of these political externalities, the strategic tradeoffs it creates for platforms vis-à-visnetwork effects, and how and why platforms respond to these tradeoffs by creating and enforcing rules. We theorize that a higher potential for network effects leads platforms to generate more negative political externalities, to more negatively affect non-users than users, and to selectively enforce rules based on users’ contribution to network effects. By focusing on the interaction of political externalities and network effects, and how platforms respond to it, our framework explains when and why platforms may choose not to mitigate negative political externalities. We contribute to research on externalities arising due to platform actions, particularly in their role as private regulators, and offer implications for managerial practice and policymakers.