Social Learning or Network Externalities?

28 Pages Posted: 1 Sep 2018 Last revised: 24 Sep 2018

See all articles by Ryan Lampe

Ryan Lampe

California State University, East Bay - Department of Economics

Joseph Kuehn

California State University, East Bay - Department of Economics

Date Written: September 13, 2018

Abstract

This paper examines the relative importance of network externalities and social learning in generating sales momentum. Social learning finds strong support in an established literature, but it is found to have a negligible role in recent research by Gilchrist and Sands (2016), which emphasizes the importance of network externalities. We show that Gilchrist and Sands’ findings from the U.S. motion picture industry are not robust to alternative, and very credible, measures of movie quality. Using these alternative measures, we find very strong evidence of social learning. We also estimate a weekly movie-level demand model to identify which of the two mechanisms is more important in generating ticket sales momentum. Estimates using a larger data set of 2,603 movies between 1995 and 2014 are consistent with our extensions to the Gilchrist and Sands framework: there is strong evidence of social learning but little evidence of network externalities.

Keywords: network externalities, social learning

JEL Classification: D83

Suggested Citation

Lampe, Ryan and Kuehn, Joseph, Social Learning or Network Externalities? (September 13, 2018). Available at SSRN: https://ssrn.com/abstract=3237912 or http://dx.doi.org/10.2139/ssrn.3237912

Ryan Lampe (Contact Author)

California State University, East Bay - Department of Economics ( email )

25800 Carlos Bee Blvd.
Hayward, CA 94542
United States

Joseph Kuehn

California State University, East Bay - Department of Economics ( email )

25800 Carlos Bee Blvd.
Hayward, CA 94542
United States

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