Template-Type: ReDIF-Paper 1.0
Author-Name: Block, J.H.
Author-Name-Last: Block
Author-Name-First: Jörn
Author-Person: pbl61
Author-Name: Koellinger, Ph.D.
Author-Name-Last: Koellinger
Author-Name-First: Philipp
Author-Person: pko149
Title: Peer Influence in Network Markets: An Empirical Investigation
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.
Creation-Date: 2007-09-14
File-URL: https://repub.eur.nl/pub/10540/ERS-2007-063-ORG.pdf
File-Format: application/pdf
Series: RePEc:ems:eureri
Number: ERS-2007-063-ORG
Classification-JEL: M, M13, M31, O32
Keywords: Hazard Rate Model, Innovation Diffusion, Instant Messaging, Network Markets, Peer Influence
Handle: RePEc:ems:eureri:10540