Endogenous Versus Exogenous Shocks in Complex Networks: An Empirical Test Using Book Sale Rankings

5 Pages Posted: 18 Nov 2003 Last revised: 2 Apr 2011

See all articles by Didier Sornette

Didier Sornette

ETH Zürich - Department of Management, Technology, and Economics (D-MTEC); Swiss Finance Institute

Fabrice Deschatres

affiliation not provided to SSRN

Thomas Gilbert

University of Washington - Department of Finance and Business Economics

Yann Ageon

Université de Nice Sophia Antipolis - Laboratoire de Physique de la Matiere Condensee (LPMC)

Date Written: October 4, 2004

Abstract

We study the precursory and recovery signatures accompanying shocks in complex networks, that we test on a unique database of the amazon.com ranking of book sales. We find clear distinguishing signatures classifying two types of sales peaks. Exogenous peaks occur abruptly and are followed by a power law relaxation, while endogenous peaks occur after a progressively accelerating power law growth followed by an approximately symmetrical power law relaxation which is slower than for exogenous peaks. These results are rationalized quantitatively by a simple model of epidemic propagation of interactions with long memory within a network of acquaintances. The observed relaxation of sales implies that the sales dynamics is dominated by cascades rather than by the direct effects of news or advertisements, indicating that the social network is close to critical.

Keywords: Amazon, shocks, endogenous, exogenous, networks, critical, marketing

JEL Classification: M31, E21, C12

Suggested Citation

Sornette, Didier and Deschatres, Fabrice and Gilbert, Thomas and Ageon, Yann, Endogenous Versus Exogenous Shocks in Complex Networks: An Empirical Test Using Book Sale Rankings (October 4, 2004). Physical Review Letters, Vol. 93, 2004. Available at SSRN: https://ssrn.com/abstract=456860 or http://dx.doi.org/10.2139/ssrn.456860

Didier Sornette (Contact Author)

ETH Zürich - Department of Management, Technology, and Economics (D-MTEC) ( email )

Scheuchzerstrasse 7
Zurich, ZURICH CH-8092
Switzerland
41446328917 (Phone)
41446321914 (Fax)

HOME PAGE: http://www.er.ethz.ch/

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Fabrice Deschatres

affiliation not provided to SSRN ( email )

Thomas Gilbert

University of Washington - Department of Finance and Business Economics ( email )

Box 353200
Seattle, WA 98195
United States
206-616-7184 (Phone)

HOME PAGE: http://faculty.washington.edu/gilbertt/

Yann Ageon

Université de Nice Sophia Antipolis - Laboratoire de Physique de la Matiere Condensee (LPMC) ( email )

CNRS U. M. R. 6622
Parc Valrose
06108 Nice Cedex 2
France
04-92-07-67-42 (Phone)

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