Peer Influence in Network Markets: An Empirical Investigation

Block, Joern; Köllinger, Philipp

doi:10.1007/bf03396755

Cited by 11 publications

(7 citation statements)

References 33 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Second, growing the network is beneficial for network members, who can thus be expected to engage in exerting peer influence on not-yet-adopters. On this peer effect, the extant literature is largely silent, with Domingos and Richardson (2001), Subramani and Rajagopalan (2003) and Block and Köllinger (2007) as notable exceptions. In particular, there exists no theoretical model describing and analyzing the peer effect.…”

Section: Discussionmentioning

confidence: 99%

“…The installed-base effect is found to exist in industries as diverse as PC and software (e.g., Brynjolfsson and Kemerer 1996;Gandal 1994;Koski 1999), fax machines (Economides and Himmelberg 1995), automated teller machines (Saloner and Shepard 1995), telecommunications (Birke and Swann 2006;Majumdar and Venkataraman 1998), consumer electronics (Shankar and Bayus 2003), and yellow pages (Rysman 2004). To our knowledge, only one empirical study analyzes the peer effect (Block and Köllinger 2007), finding that it has a strong impact on the adoption of Internet-based Instant Messaging services.…”

Section: Related Literaturementioning

confidence: 99%

See 1 more Smart Citation

Peer influence in network markets: a theoretical and empirical analysis

Henkel

Block

2013

J Evol Econ

View full text Add to dashboard Cite

Network externalities spur the growth of networks and the adoption of network goods in two ways. First, they make it more attractive to join a network the larger its installed base. Second, they create incentives for network members to actively recruit new members. Despite indications that the latter "peer effect" can be more important for network growth than the installed-base effect, it has so far been largely ignored in the literature. We address this gap using game-theoretical models. When all early adopters can band together to exert peer influence-an assumption that fits, e.g., the case of firms supporting a technical standard-we find that the peer effect induces additional growth of the network by a factor. When, in contrast, individuals exert peer influence in small groups of size n, the increase in network size is by an additive constant-which, for small networks, can amount to a large relative increase. The difference between small, local, personal networks and large, global, anonymous networks arises endogenously from our analysis. Fundamentally, the first type of networks is "tie-reinforcing," the other, "tie-creating". We use survey data from users of the Internet services, Skype and eBay, to illustrate the main logic of our theoretical results. As predicted by the model, we find that the peer effect matters strongly for the network of Skype users-which effectively consists of numerous small sub-networks-but not for that of eBay users. Since many network goods give rise to small, local networks, our findings bear relevance to the economics of network goods and related social networks in general.

show abstract

Section: Discussionmentioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

Peer influence in network markets: a theoretical and empirical analysis

Henkel

Block

2013

J Evol Econ

View full text Add to dashboard Cite

show abstract

“…Possible explanations include individuals eagerness to share enthusiasm and frustration with their peers and their increased joy of consuming the good based on the possibility to discuss, rave, slaughter and define themselves by the things they like [10]. It has also been argued by [11] and [12] that network externalities provide a rationale for recommend products and services. Hill et al [9] note that some consumers value the appearance of being on the cutting edge or in the know, and therefore derive satisfaction from promoting new, exciting products.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Different items related to motivational aspects proposed by existing literature [9,10,11,12] were included in the questionnaire and presented to those respondents who had indicated to have sent recommendations to other people. Altruistic aspects received the highest agreement rates.…”

Section: Motivationmentioning

confidence: 99%

Agents of Diffusion - Insights from a Survey of Facebook Users

Ermecke¹,

Mayrhofer²,

Wagner

2009

2009 42nd Hawaii International Conference on System Sciences

View full text Add to dashboard Cite

In times of web 2.0 and its strong focus on user interaction in business models, entrepreneurs and investors of internet businesses often back up their ambitious growth expectations with the argument of viral distribution. However, there exists little evidence on the determinants of consumers willingness to voluntarily and actively exchange information about internet applications.Based on survey data of 475 Facebook users, this paper makes a contribution to fill this gap. Key findings are that passive (observation of other users) and active (purposeful recommendations from peers) viral channels are equally important to make users aware of a novel product. Active viral channels, however, dominate in convincing users to actually start using a product or service. We also find that users are altruistically motivated to recommend applications and predominantly use built-in invitation mechanisms in the application as a communication channel for recommendations. This paper contributes to the field of electronic marketing in two ways. First and foremost it brings forward empirical evidence on the interpersonal aspects of the mechanisms behind viral distribution and word-of-mouth marketing. Second, it presents the illustrative case of Facebook which has become a fore-runner in online marketing when it comes to taking into account user interaction and behavior.

show abstract

“…The installed-base effect is found to exist in industries as diverse as PC and software (e.g., Brynjolfsson and Kemerer 1996;Gandal 1994;Koski 1999), fax machines (Economides and Himmelberg 1995) automated teller machines (Saloner and Shepard 1995), telecommunications (Majumdar and Venkatamaran 1998), consumer electronics (Shankar and Bayus 2003), and yellow pages (Rysman 2004). To our knowledge, only one recent empirical study analyzed the peer effect (Block and Köllinger 2006). In this study, the authors show the peer effect to have a strong impact on the adoption of Internet-based Instant Messaging services.…”

mentioning

confidence: 95%

Peer Influence in Network Markets: An Empirical and Theoretical Analysis.

Henkel¹,

Block²

2008

AMPROC

View full text Add to dashboard Cite

Network externalities spur the growth of networks and the adoption of network goods in two ways. First, they make it attractive to join a network with a large installed base. Second, they make it attractive for network members to actively recruit new members. Despite indications that this "peer effect" can be more important for network growth than the installed-base effect, it has so far been largely ignored in the literature. We aim at closing this gap, using both survey data and a game-theoretical model. Comparing respondents' adoption of two distinct networks goods, we find that the peer effect matters strongly for small, but not for large networks. Results from model analysis support this finding. Under conservative assumptions, the increase in network size due to the peer effect is by an additive constant -which, for small networks, can amount to a large relative increase. The difference between small, local, and personal networks and large, global, anonymous networks thus arises endogenously from our model. In the duopoly case, we find that introducing the peer effect favors winner-take-all outcomes. We use the examples of the Internet services, Skype and eBay, for our empirical analysis and as illustration of our theoretical findings. Since many network goods give rise to small, local networks, our findings are highly relevant for the management of network goods and the social networks they can give rise to.

show abstract

Peer Influence in Network Markets: An Empirical Investigation

Cited by 11 publications

References 33 publications

Peer influence in network markets: a theoretical and empirical analysis

Peer influence in network markets: a theoretical and empirical analysis

Agents of Diffusion - Insights from a Survey of Facebook Users

Peer Influence in Network Markets: An Empirical and Theoretical Analysis.

Contact Info

Product

Resources

About