Social Interactions, Network Fluidity and Network Effects

Catherine Tucker

No 08-30, Working Papers from NET Institute

Abstract: This paper asks how much the strength of network effects depends on the stability and structure of the underlying social network. I answer this using extensive micro-data on all potential adopters of a firm's internal video-messaging system and their subsequent video-messaging. This firm's New York office had to be relocated due to the terrorist attacks of 2001 which lead to a physical re-organization of teams in that city but not in other comparable cities. I study the consequences of this disruption for adoption of video-messaging and the size of network effects. I find evidence that generally network effects are based on direct social interactions. Potential adopters react to adoption only by people they wish to communicate with: They are not affected by adoption by other people. However, when there is a disruption to the social network and communication patterns become less predictable, users become more responsive to adoption by a broader group of users.

Keywords: Network Effects; Local Networks; Stability; Option-Value (search for similar items in EconPapers)
JEL-codes: K21 L12 L40 L42 Q31 Q34 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2008-10
New Economics Papers: this item is included in nep-law, nep-net, nep-soc and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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