An Equilibrium Model of User Generated Content
53 Pages Posted: 26 Dec 2011 Last revised: 20 Aug 2014
Date Written: October 1, 2011
Abstract
This paper considers the joint creation and consumption of content on user generated content platforms (e.g., reviews or articles, chat, videos, etc.). On these platforms, users’ utilities depend upon the participation of others; hence, users’ expectations regarding the participation of others on the site becomes germane to their own involvement levels. Yet these beliefs are often assumed to be fixed. Accordingly, we develop a dynamic rational expectations equilibrium model of joint consumption and generation of information. We estimate the model on a novel data set from a large Internet forum site and use the model to offer recommendations regarding site strategy. Results indicate that beliefs play a major role in UGC, ignoring these beliefs leads to erroneous inferences about consumer behavior, and that these beliefs have an important implications for the marketing strategy of UGC sites.
We find that user and site generated content can be either strategic complements or substitutes depending on whether the competition for existing readers exceeds the potential to attract new ones. In our data, the competitive effect substantially dilutes the market expansion effect of site generated content. Likewise, past and current content can also be either strategic substitutes or complements. Results indicate more durable content increases overall site participation, suggesting that the site should invest in making past information easier to find (via better search or page design). Third, because content consumption and generation interact, it is unclear which factor dominates in network growth. We find that decreasing content consumption costs (perhaps by changing site design or via search tools) enhances site engagement more than decreasing content generating costs. Overall, enhancing content durability and reducing content consumption cost appear to be the most effective strategies for increasing site visitation.
JEL Classification: D7,D8, M1, M3
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Asymmetric Social Interactions in Physician Prescription Behavior: The Role of Opinion Leaders
By Harikesh Nair, Puneet Manchanda, ...
-
Social Contagion and Trial on the Internet: Evidence from Online Grocery Retailing
By David R. Bell and Sangyoung Song
-
The Effects of Service Quality and Word of Mouth on Customer Acquisition, Retention and Usage
By Sungjoon Nam, Puneet Manchanda, ...
-
User Content Generation and Usage Behavior on the Mobile Internet: An Empirical Analysis
By Anindya Ghose and Sang Pil Han
-
Social Ties and User Generated Content: Evidence from an Online Social Network
By Scott K. Shriver, Harikesh Nair, ...
-
Social Ties and User-Generated Content: Evidence from an Online Social Network
By Scott K. Shriver, Harikesh Nair, ...
-
Evaluating Promotional Activities in an Online Two-Sided Market of User-Generated Content
By Paulo Albuquerque, Polykarpos Pavlidis, ...
-
A Mathematical Model for New Product Diffusion: The Influence of Innovators and Imitators
By Paul Steffens and Deeksha Murthy
-
A Dynamic Structural Model of User Learning on the Mobile Internet
By Anindya Ghose and Sang Pil Han