Social Interactions, Network Fluidity and Network Effects
AbstractThis 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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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 08-30.
Length: 27 pages
Date of creation: Oct 2008
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Network Effects; Local Networks; Stability; Option-Value;
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; Prices
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-21 (All new papers)
- NEP-LAW-2008-10-21 (Law & Economics)
- NEP-NET-2008-10-21 (Network Economics)
- NEP-SOC-2008-10-21 (Social Norms & Social Capital)
- NEP-URE-2008-10-21 (Urban & Real Estate Economics)
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