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Social Interactions, Network Fluidity and Network Effects

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Author Info
Catherine Tucker () (MIT Marketing)

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Abstract

This paper asks how much the strength of network effects depends on the stability and structure of the underlying social network. I answer this using extensive micro-data on all potential adopters of a firm's internal video-messaging system and their subsequent video-messaging. This firm's New York office had to be relocated due to the terrorist attacks of 2001 which lead to a physical re-organization of teams in that city but not in other comparable cities. I study the consequences of this disruption for adoption of video-messaging and the size of network effects. I find evidence that generally network effects are based on direct social interactions. Potential adopters react to adoption only by people they wish to communicate with: They are not affected by adoption by other people. However, when there is a disruption to the social network and communication patterns become less predictable, users become more responsive to adoption by a broader group of users.

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Publisher Info
Paper provided by NET Institute in its series Working Papers with number 08-30.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 27 pages
Date of creation: Oct 2008
Date of revision: Oct 2008
Handle: RePEc:net:wpaper:0830

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

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Related research
Keywords: Network Effects; Local Networks; Stability; Option-Value;

Other versions of this item:

Find related papers by JEL classification:
K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply
Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Marc Rysman, 2004. "Competition Between Networks: A Study of the Market for Yellow Pages," Review of Economic Studies, Blackwell Publishing, vol. 71(2), pages 483-512, 04. [Downloadable!] (restricted)
  2. Pindyck, Robert S., 1993. "Investments of uncertain cost," Journal of Financial Economics, Elsevier, vol. 34(1), pages 53-76, August. [Downloadable!] (restricted)
    Other versions:
  3. Gale, Douglas & Kariv, Shachar, 2003. "Bayesian learning in social networks," Games and Economic Behavior, Elsevier, vol. 45(2), pages 329-346, November. [Downloadable!] (restricted)
  4. Edward P. Lazear, 2000. "The Power of Incentives," American Economic Review, American Economic Association, vol. 90(2), pages 410-414, May. [Downloadable!] (restricted)
  5. Arun Sundararajan, 2004. "Local Network Effects and Network Structure," Industrial Organization 0412011, EconWPA. [Downloadable!]
  6. Jenkins, Stephen P, 1995. "Easy Estimation Methods for Discrete-Time Duration Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 129-38, February.
  7. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Stephen Ryan & Catherine Tucker, 2006. "Heterogeneity and the Dynamics of Technology Adoption," Working Papers 06-26, NET Institute, revised Oct 2006. [Downloadable!]
  9. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Blackwell Publishing, vol. 60(3), pages 531-42, July. [Downloadable!] (restricted)
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