Peer Influence in Network Markets: An Empirical Investigation
We analyze the effect of peer influence on the diffusion of an innovative network good. We argue that the adopters of a network good have an incentive to convince others to purchase the same product because their utility depends on the number of other users. This peer-effect influences individuals’ adoption decisions alongside the more familiar installed-base-effect, based on the individual’s own insight that a larger number of installed units increases his/her benefit of adopting. We test empirically which effect dominates with Instant Messaging, an innovative network good. We arrive at surprising results with far-reaching implications for research and management. The diffusion of Instant Messaging was to a large extent driven by the peer-effect, but the installed base-effect seemed to play no role. We perform our estimation with a discrete time hazard rate model that controls for unobserved heterogeneity.
Volume (Year): 59 (2007)
Issue (Month): 4 (October)
|Contact details of provider:|| Postal: Geschwister-Scholl-Platz 1, 80539 Muenchen|
Phone: 0049 89 2180 2166
Fax: 0049 89 2180 6327
Web page: http://www.sbr-online.com
More information through EDIRC
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.:
- Armin Falk & Andrea Ichino, 2006.
"Clean Evidence on Peer Effects,"
Journal of Labor Economics,
University of Chicago Press, vol. 24(1), pages 39-58, January.
- Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-41, August.
- Stanley M. Besen & Joseph Farrell, 1994. "Choosing How to Compete: Strategies and Tactics in Standardization," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 117-131, Spring.
- Pechmann, Cornelia & Knight, Susan J, 2002. " An Experimental Investigation of the Joint Effects of Advertising and Peers on Adolescents' Beliefs and Intentions about Cigarette Consumption," Journal of Consumer Research, Oxford University Press, vol. 29(1), pages 5-19, June.
- Bearden, William O & Etzel, Michael J, 1982. " Reference Group Influence on Product and Brand Purchase Decisions," Journal of Consumer Research, Oxford University Press, vol. 9(2), pages 183-94, September.
- Dickerson, Mary Dee & Gentry, James W, 1983. " Characteristics of Adopters and Non-Adopters of Home Computers," Journal of Consumer Research, Oxford University Press, vol. 10(2), pages 225-35, September.
- 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.
- S. J. Liebowitz & Stephen E. Margolis, 1994. "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 133-150, Spring.
- Katz, Michael L & Shapiro, Carl, 1992. "Product Introduction with Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 55-83, March.
- Childers, Terry L & Rao, Akshay R, 1992. " The Influence of Familial and Peer-Based Reference Groups on Consumer Decisions," Journal of Consumer Research, Oxford University Press, vol. 19(2), pages 198-211, September.
When requesting a correction, please mention this item's handle: RePEc:sbr:abstra:v:59:y:2007:i:4:p:364-386. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (sbr)The email address of this maintainer does not seem to be valid anymore. Please ask sbr to update the entry or send us the correct email address
If references are entirely missing, you can add them using this form.