Peer Influence in Network Markets: An Empirical Investigation

48 Pages Posted: 17 Oct 2007

See all articles by J.H. Block

J.H. Block

affiliation not provided to SSRN

Philipp Koellinger

Vrije Universiteit Amsterdam

Date Written: September 14, 2007

Abstract

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.

Keywords: Hazard Rate Model, Innovation Diffusion, Instant Messaging, Network Markets, Peer Influence

Suggested Citation

Block, J.H. and Koellinger, Philipp, Peer Influence in Network Markets: An Empirical Investigation (September 14, 2007). ERIM Report Series Reference No. ERS-2007-063-ORG. Available at SSRN: https://ssrn.com/abstract=1021885

J.H. Block (Contact Author)

affiliation not provided to SSRN

No Address Available

Philipp Koellinger

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

HOME PAGE: http://www.philipp-koellinger.com

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
154
Abstract Views
1,229
rank
201,063
PlumX Metrics