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Peer Effects in Product Adoption

Author

Listed:
  • Michael Bailey

    (Facebook)

  • Drew Johnston

    (Harvard University)

  • Theresa Kuchler

    (New York University)

  • Johannes Stroebel

    (New York University)

  • Arlene Wong

    (Princeton University)

Abstract

We use de-identified data from Facebook to study the nature of peer effects in the market for cell phones. To identify peer effects, we exploit variation in friends’ new phone acquisitions resulting from random phone losses. A new phone purchase by a friend has a large and persistent effect on an individual’s own demand for phones of the same brand. While peer effects increase the overall demand for phones, a friend’s purchase of a particular phone brand can reduce an individual’s own demand for phones from competing brands, in particular if they are running on a different operating system.

Suggested Citation

  • Michael Bailey & Drew Johnston & Theresa Kuchler & Johannes Stroebel & Arlene Wong, 2021. "Peer Effects in Product Adoption," Working Papers 2021-66, Princeton University. Economics Department..
    • Handle: RePEc:pri:econom:2021-66
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    File URL: https://pages.stern.nyu.edu/~jstroebe/PDF/BJKSW_PeerEffectsProductAdoption.pdf
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    Keywords

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    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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