Social Networks and New Product Choice

Timothy J. Richards, Stephen Hamilton and William J. Allender

American Journal of Agricultural Economics, 2014, vol. 96, issue 2, 489-516

Abstract: To successfully market new products in a social network it is essential to identify influential individuals whose product recommendations influence the consumption choices of their peers. In this study, we use spatial econometric methods to determine how individuals revise their preferences for product attributes when exposed to product recommendations from peers, and how different individuals who vary in their degree of network connectedness exert influence on the product choices of others. We find evidence that consumers look to others for guidance from peers in their preference for subjective, taste-specific parameters, but tend not to respond to peer price choices. Our spatial methods allow us to empirically determine the influence exerted by individual members on the consumption choices of other members of the social network. We find that connected members of the social network are not always the most influential in revising the consumption choices of others. Our estimates reveal that network proximity explains only 8.8% of influence.

Date: 2014
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Working Paper: Social Networks and New Product Choice (2012)
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