Online Peer-to-peer Communities: An Empirical Investigation of a Music Sharing Network as a Dynamic Two-sided Network
AbstractOnline 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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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 07-42.
Length: 32 pages
Date of creation: Oct 2007
Date of revision: Oct 2007
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Web page: http://www.NETinst.org/
online communities; two-sided networks; IRC channel; peer-to-peer network; evolutionary games; digital piracy;
Find related papers by JEL classification:
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-10 (All new papers)
- NEP-CUL-2007-11-10 (Cultural Economics)
- NEP-ICT-2007-11-10 (Information & Communication Technologies)
- NEP-NET-2007-11-10 (Network Economics)
- NEP-SOC-2007-11-10 (Social Norms & Social Capital)
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- Jean-Charles Rochet & Jean Triole, 2002.
"Platform Competition in Two Sided Markets,"
FMG Discussion Papers
dp409, Financial Markets Group.
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