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Assessing and Quantifying Local Network Effects in an Online Dating Market

Listed author(s):
  • Gordon Burtch

    ()

    (University of Minnesota, Carlson School of Management, Information & Decision Sciences Department, 321 19th Ave. S., Minneapolis, MN 55408, USA)

  • Jui Ramaprasad

    ()

    (McGill University, Desautels Faculty of Management, 1001 Rue Sherbrooke O, Montréal, QC H3A 1G5, Canada)

Registered author(s):

    We empirically examine and quantify network effects on a large online dating platform in Brazil. We consider the effects of a seeding intervention by the platform operator, wherein it acquired its primary competitor and subsequently imported the competitor’s 150,000 user accounts over a 3-day period. The acquisition thus constitutes a large exogenous shock the composition of the acquiring platform’s user base. We estimate the effect of the shock on the rate of subsequent enrollments and exits amongst heterosexual users across 120 cities. Bearing in mind that the purchased users were exclusively heterosexual, we employ a difference-in-differences specification in which homosexual enrollment and exit rates serve as plausible controls. Our estimates indicate that the treatment increased the rates of both enrollment and exit, for both genders, with a net positive effect that translated to a 22% increase in short-term revenue for the platform. Further, we find that the response amongst male users was significantly stronger. When we consider that female participation was being fully subsidized by the acquiring platform, this result is consistent with the idea that subsidies and seeding strategies are substitutes, rather than complements. Finally, we explore nuances of the observed effects, quantifying local features. In particular, we show that the treatment effect varied significantly, depending on age differences and the degree of co-location between new and existing users.

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    File URL: http://www.netinst.org/Burtch_16-05.pdf
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    Paper provided by NET Institute in its series Working Papers with number 16-05.

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    Length: 29 pages
    Date of creation: Aug 2016
    Handle: RePEc:net:wpaper:1605
    Contact details of provider: Web page: http://www.NETinst.org/

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    1. Wooldridge, Jeffrey M., 1999. "Distribution-free estimation of some nonlinear panel data models," Journal of Econometrics, Elsevier, vol. 90(1), pages 77-97, May.
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    8. David H. Autor, 2003. "Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 1-42, January.
    9. Catherine Tucker & Juanjuan Zhang, 2010. "Growing Two-Sided Networks by Advertising the User Base: A Field Experiment," Marketing Science, INFORMS, vol. 29(5), pages 805-814, 09-10.
    10. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    11. Mingchun Sun & Edison Tse, 2009. "The Resource-Based View of Competitive Advantage in Two-Sided Markets," Journal of Management Studies, Wiley Blackwell, vol. 46(1), pages 45-64, 01.
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