Online Peer-to-Peer Communities: An Empirical Investigation of a Music Sharing Community as a Dynamic Two-Sided Network

38 Pages Posted: 7 Nov 2007 Last revised: 12 Nov 2007

See all articles by Bin Gu

Bin Gu

Boston University - Questrom School of Business

Yun Huang

University of Texas at Austin - Department of Information, Risk and Operations Management; Northwestern University - Department of Industrial Engineering and Management Sciences

Wenjing Duan

George Washington University - School of Business

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management

Date Written: October 2007

Abstract

Online peer-to-peer communities and online social networks have become increasingly popular. In particular, the recent boost of online peer-to-peer communities leads to exponential growth in sharing of user-contributed content which have brought profound changes to business and economic practices. Understanding the formation and sustainability of such peer-to-peer communities has important implications for businesses. We develop a dynamic two-sided network model that relates growth of communities to interactions between contribution and consumption of resources in online sharing activities. Using online music sharing data collected from a popular IRC music sharing service over five years, we empirically apply the model to identify dynamics in the music sharing community. We find that the music sharing community demonstrates distinctive characteristics of a two-sided network. Contribution in the community leads to more consumption and consumption leads to more contribution, creating positive network effects in the community. Moreover, we find significant negative externalities among consumption activities and among contribution activities. The combination of the positive and negative externalities drives the underlying dynamics and growth of online sharing communities. Using the dynamic model, we quantify equilibrium growth rate of the community. We find that the equilibrium growth rate changes over time, possibly as a result of legal actions taken by the music industry. Our study provides a first glimpse into the mechanism through which peer-to-peer communities sustain and thrive in a constantly changing environment.

Keywords: online communities, two-sided networks, IRC channel, P2P music sharing, evolutionary games, digital piracy

JEL Classification: L14, C73, O34

Suggested Citation

Gu, Bin and Huang, Yun and Huang, Yun and Duan, Wenjing and Whinston, Andrew B., Online Peer-to-Peer Communities: An Empirical Investigation of a Music Sharing Community as a Dynamic Two-Sided Network (October 2007). NET Institute Working Paper No. 07-42, Available at SSRN: https://ssrn.com/abstract=1027215 or http://dx.doi.org/10.2139/ssrn.1027215

Bin Gu (Contact Author)

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

Yun Huang

University of Texas at Austin - Department of Information, Risk and Operations Management ( email )

CBA 5.202
Austin, TX 78712
United States

Northwestern University - Department of Industrial Engineering and Management Sciences ( email )

Evanston, IL 60208-3119
United States

Wenjing Duan

George Washington University - School of Business ( email )

2121 I Street NW
Washington, DC 20052
United States

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management ( email )

CBA 5.202
Austin, TX 78712
United States
512-471-8879 (Phone)

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