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Melting-Pot or Homophily? - An Empirical Investigation of User Interactions in Virtual Investment-Related Communities

36 Pages Posted: 26 Aug 2008 Last revised: 5 Aug 2014

Bin Gu

Arizona State University (ASU) - Department of Information Systems

Prabhudev Konana

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

Hsuan-Wei Michelle Chen

University of Connecticut - Department of Operations & Information Management

Date Written: August 26, 2008

Abstract

Much has been discussed in popular press about virtual communities being melting pots of ideas and opinions. However, little is known as to how individuals actually interact in virtual communities and to what degree interactions occur between individuals with different ideas and opinions, which are reflected in how individuals respond (i.e., post) to others’ messages. In this study, we analyze individual interactions in virtual communities based on the cognitive dissonance theory. We argue that individual interaction decisions are motivated by the desire to decrease dissonance between an individual’s own opinion and the opinions of others in the community. This desire results in confirmation bias and homophily phenomenon in individual interaction decisions, i.e., individuals prefer interaction with others with similar opinions. Based on the cognitive dissonance theory, we propose that, the degree of confirmation bias is moderated by the magnitude of dissonance, the availability of objective references, and the community size. Using 72,019 individual interactions in 29 stock message boards on Yahoo! Finance investment-related communities, we show significant support for the hypotheses. We discuss the implications of the confirmation bias on individual decision making, information dissemination and the value of virtual communities as an information source.

Keywords: Virtual Communities, Homophily, Cognitive Dissonance, Psychological Biases, Confirmatory Bias, Social Network

JEL Classification: D71, D81, D83, M31

Suggested Citation

Gu, Bin and Konana, Prabhudev and Chen, Hsuan-Wei Michelle, Melting-Pot or Homophily? - An Empirical Investigation of User Interactions in Virtual Investment-Related Communities (August 26, 2008). McCombs Research Paper Series No. IROM-05-08. Available at SSRN: https://ssrn.com/abstract=1259224 or http://dx.doi.org/10.2139/ssrn.1259224

Bin Gu (Contact Author)

Arizona State University (ASU) - Department of Information Systems ( email )

Tempe, AZ
United States

Prabhudev Konana

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

CBA 5.202
Austin, TX 78712
United States

Hsuan-Wei Michelle Chen

University of Connecticut - Department of Operations & Information Management ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

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