Online Peer-to-peer Communities: An Empirical Investigation of a Music Sharing Network as a Dynamic Two-sided Network

Bin Gu (), Yun Huang (), Wenjing Duan () and Andrew B. Whinston ()
Additional contact information
Bin Gu: McCombs School of Business, University of Texas at Austin
Yun Huang: McCormick School of Engineering and Applied Science, Northwestern University, http://www.yunh.net
Wenjing Duan: George Washington University
Andrew B. Whinston: McCombs School of Business, University of Texas at Austin

No 07-42, Working Papers from NET Institute

Abstract: Online peer-to-peer communities and online social networks have become increasingly popular. In particular, the recent boost of online peer-to-peer communities leads to exponential growth in sharing of user-contributed content which have brought profound changes to business and economic practices. Understanding the formation and sustainability of such peer-to-peer communities has important implications for businesses. We develop a dynamic two-sided network model that relates growth of communities to interactions between contribution and consumption of resources in online sharing activities. Using online music sharing data collected from a popular IRC music sharing service over five years, we empirically apply the model to identify dynamics in the music sharing community. We find that the music sharing community demonstrates distinctive characteristics of a two-sided network. Contribution in the community leads to more consumption and consumption leads to more contribution, creating positive network effects in the community. Moreover, we find significant negative externalities among consumption activities and among contribution activities. The combination of the positive and negative externalities drives the underlying dynamics and growth of online sharing communities. Using the dynamic model, we quantify equilibrium growth rate of the community. We find that the equilibrium growth rate changes over time, possibly as a result of legal actions taken by the music industry. Our study provides a first glimpse into the mechanism through which peer-to-peer communities sustain and thrive in a constantly changing environment.

Keywords: online communities; two-sided networks; IRC channel; peer-to-peer network; evolutionary games; digital piracy (search for similar items in EconPapers)
JEL-codes: C73 L14 O34 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2007-10, Revised 2007-10
New Economics Papers: this item is included in nep-cul, nep-ict, nep-net and nep-soc
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