The Sharing Economy: Information Cascades, Network Effects and Power Laws

Swati Bhatt
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Swati Bhatt: Princeton University

Chapter 6 in How Digital Communication Technology Shapes Markets, 2017, pp 105-118 from Palgrave Macmillan

Abstract: Abstract Connectivity generates familiarity and induces collaboration, and also the phenomenon of copying, known also as FOMO (fear of missing out). Imitating others’ behavior derives from the social influence of networks which is different from homophily or joining groups with similar characteristics. While financial markets have manifested granularity in the unbundling of functions of financial intermediation, such as payments, risk management, savings and investment, there has also been the formation of OB due to copying. Connectivity has fostered imitation to economize on search costs and to benefit from shared networks. Copying can have adverse consequences, as when all economic agents congregate at the same hub, and, by adopting the same behavior, precipitate disastrous consequences as we saw in the 2008 financial crisis.

Keywords: Information cascades; Network effects; Financial markets; Spontaneous feedback effects (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:pal:paiecp:978-3-319-47250-8_6

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DOI: 10.1007/978-3-319-47250-8_6

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