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Latent Homophily or Social Influence? An Empirical Analysis of Purchase Within a Social Network

Author

Listed:
  • Liye Ma

    () (Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742)

  • Ramayya Krishnan

    () (H. J. Heinz III College, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Alan L. Montgomery

    () (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

Abstract

Consumers who are close to one another in a social network often make similar purchase decisions. This similarity can result from latent homophily or social influence, as well as common exogenous factors. Latent homophily means consumers who are connected to one another are likely to have similar characteristics and product preferences. Social influence refers to the ability of one consumer to directly influence another consumer's decision based upon their communication. We present an empirical study of purchases of caller ring-back tones using data from an Asian mobile network that predicts consumers' purchase timing and choice decisions. We simultaneously measure latent homophily and social influence, while also accounting for exogenous factors. Identification is achieved due to our dynamic, panel data structure and the availability of detailed communication data. We find strong influence effects and latent homophily effects in both the purchase timing and product choice decisions of consumers. This paper was accepted by Sandra Slaughter, information systems.

Suggested Citation

  • Liye Ma & Ramayya Krishnan & Alan L. Montgomery, 2015. "Latent Homophily or Social Influence? An Empirical Analysis of Purchase Within a Social Network," Management Science, INFORMS, vol. 61(2), pages 454-473, February.
  • Handle: RePEc:inm:ormnsc:v:61:y:2015:i:2:p:454-473
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    File URL: http://dx.doi.org/10.1287/mnsc.2014.1928
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    Cited by:

    1. Peter Wittek & Sándor Darányi & Gustaf Nelhans, 2017. "Ruling out static latent homophily in citation networks," Scientometrics, Springer;Akadémiai Kiadó, vol. 110(2), pages 765-777, February.

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