Peer Influence in Network Markets: An Empirical Investigation

Joern Block and Philipp Köllinger
Authors registered in the RePEc Author Service: Philipp Koellinger

Schmalenbach Business Review (sbr), 2007, vol. 59, issue 4, 364-386

Abstract: We analyze the effect of peer influence on the diffusion of an innovative network good. We argue that the adopters of a network good have an incentive to convince others to purchase the same product because their utility depends on the number of other users. This peer-effect influences individuals’ adoption decisions alongside the more familiar installed-base-effect, based on the individual’s own insight that a larger number of installed units increases his/her benefit of adopting. We test empirically which effect dominates with Instant Messaging, an innovative network good. We arrive at surprising results with far-reaching implications for research and management. The diffusion of Instant Messaging was to a large extent driven by the peer-effect, but the installed base-effect seemed to play no role. We perform our estimation with a discrete time hazard rate model that controls for unobserved heterogeneity.

Keywords: Hazard Rate Model; Innovation Diffusion; Instant Messaging; Network Markets; Peer Influence (search for similar items in EconPapers)
JEL-codes: D12 M3 O32 (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Peer Influence in Network Markets: An Empirical Investigation (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:sbr:abstra:v:59:y:2007:i:4:p:364-386

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