Viral Social Learning
43 Pages Posted: 27 Dec 2018 Last revised: 2 Apr 2020
Date Written: April 1, 2020
An innovation (e.g., new product or idea) spreads like a virus, transmitted by those who have previously adopted it. We characterize equilibrium adoption dynamics and the resulting lifecycle of virally-spread innovations. Herding on adoption can occur but only early in the innovation lifecycle, and all virally-spread innovations eventually become obsolescent. A producer capable of advertising directly to consumers finds it optimal to wait and allow awareness to grow virally initially after launch. When most innovations would otherwise be high (low) quality absent any viral social learning, running an optimal-length viral campaign decreases (increases) equilibrium investment in innovation quality.
Keywords: social learning, viral marketing, SIR model, economic epidemic
JEL Classification: C72, D62, D83
Suggested Citation: Suggested Citation