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Social Networks and New Product Choice

  • Richards, Timothy J.
  • Allender, William J.
  • Hamilton, Stephen F.

In‡uential individuals in a social network environment are important in shaping preferences for new products. In this study, we adopt an incentive compatible choice-based conjoint analysis approach to generate data on the introduction of a new ice cream product. We use spatial econometric methods to determine how individuals are likely to change their preferences when exposed to the choices of other members in their social network. We nd evidence that agents look to others for guidance in their preference for subjective or taste-speci c parameters, but rely on own preferences for objectively measured attributes such as price. We also use spatial methods to determine which network-member is the most in‡uential. We nd that the most connected member is not necessarily the most in‡uential, and that in‡uence can be determined econometrically.

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Paper provided by Agricultural and Applied Economics Association in its series 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington with number 124762.

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Date of creation: 03 Jun 2012
Date of revision:
Handle: RePEc:ags:aaea12:124762
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  1. Brock, William A. & Durlauf, Steven N., 2007. "Identification of binary choice models with social interactions," Journal of Econometrics, Elsevier, vol. 140(1), pages 52-75, September.
  2. Calvó-Armengol, Antoni & Patacchini, Eleonora & Zenou, Yves, 2008. "Peer Effects and Social Networks in Education," IZA Discussion Papers 3859, Institute for the Study of Labor (IZA).
  3. Brownstone, David & Train, Kenneth, 1999. "Forecasting new product penetration with flexible substitution patterns," University of California Transportation Center, Working Papers qt1j6814b3, University of California Transportation Center.
  4. Brock,W.A. & Durlauf,S.N., 2000. "Discrete choice with social interactions," Working papers 7, Wisconsin Madison - Social Systems.
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  8. Driskill, Robert & McCafferty, Stephen, 2001. "Monopoly and Oligopoly Provision of Addictive Goods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 43-72, February.
  9. Trajtenberg, Manuel, 1989. "The Welfare Analysis of Product Innovations, with an Application to Computed Tomography Scanners," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 444-79, April.
  10. Case, Anne C, 1991. "Spatial Patterns in Household Demand," Econometrica, Econometric Society, vol. 59(4), pages 953-65, July.
  11. Cardell, N. Scott, 1997. "Variance Components Structures for the Extreme-Value and Logistic Distributions with Application to Models of Heterogeneity," Econometric Theory, Cambridge University Press, vol. 13(02), pages 185-213, April.
  12. David Godes & Dina Mayzlin, 2009. "Firm-Created Word-of-Mouth Communication: Evidence from a Field Test," Marketing Science, INFORMS, vol. 28(4), pages 721-739, 07-08.
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