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Online Peer-to-peer Communities: An Empirical Investigation of a Music Sharing Network as a Dynamic Two-sided Network

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Author Info

  • Bin Gu

    ()
    (McCombs School of Business, University of Texas at Austin)

  • Yun Huang

    ()
    (McCormick School of Engineering and Applied Science, Northwestern University)

  • Wenjing Duan

    ()
    (George Washington University)

  • Andrew B. Whinston

    ()
    (McCombs School of Business, University of Texas at Austin)

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    Abstract

    Online peer-to-peer communities and online social networks have become increasingly popular. In particular, the recent boost of online peer-to-peer communities leads to exponential growth in sharing of user-contributed content which have brought profound changes to business and economic practices. Understanding the formation and sustainability of such peer-to-peer communities has important implications for businesses. We develop a dynamic two-sided network model that relates growth of communities to interactions between contribution and consumption of resources in online sharing activities. Using online music sharing data collected from a popular IRC music sharing service over five years, we empirically apply the model to identify dynamics in the music sharing community. We find that the music sharing community demonstrates distinctive characteristics of a two-sided network. Contribution in the community leads to more consumption and consumption leads to more contribution, creating positive network effects in the community. Moreover, we find significant negative externalities among consumption activities and among contribution activities. The combination of the positive and negative externalities drives the underlying dynamics and growth of online sharing communities. Using the dynamic model, we quantify equilibrium growth rate of the community. We find that the equilibrium growth rate changes over time, possibly as a result of legal actions taken by the music industry. Our study provides a first glimpse into the mechanism through which peer-to-peer communities sustain and thrive in a constantly changing environment.

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    File URL: http://www.netinst.org/Gu_07-42.pdf
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    Bibliographic Info

    Paper provided by NET Institute in its series Working Papers with number 07-42.

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    Length: 32 pages
    Date of creation: Oct 2007
    Date of revision: Oct 2007
    Handle: RePEc:net:wpaper:0742

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    Web page: http://www.NETinst.org/

    Related research

    Keywords: online communities; two-sided networks; IRC channel; peer-to-peer network; evolutionary games; digital piracy;

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    1. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, 06.
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