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Peer Effects in Product Adoption

Author

Listed:
  • Michael Bailey

    (Facebook)

  • Drew Johnston

    (Harvard University)

  • Theresa Kuchler

    (New York University)

  • Johannes Stroebel

    (New York University)

  • Arlene Wong

    (Princeton University)

Abstract

We use de-identified data from Facebook to study the nature of peer effects in the market for cell phones. To identify peer effects, we exploit variation in friends’ new phone acquisitions resulting from random phone losses. A new phone purchase by a friend has a large and persistent effect on an individual’s own demand for phones of the same brand. While peer effects increase the overall demand for phones, a friend’s purchase of a particular phone brand can reduce an individual’s own demand for phones from competing brands, in particular if they are running on a different operating system.

Suggested Citation

  • Michael Bailey & Drew Johnston & Theresa Kuchler & Johannes Stroebel & Arlene Wong, 2021. "Peer Effects in Product Adoption," Working Papers 2021-66, Princeton University. Economics Department..
    • Handle: RePEc:pri:econom:2021-66
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    Cited by:

    1. Rhys Murrian & Paul A. Raschky & Klaus Ackermann, 2024. "Friends, Key Players and the Adoption and Use of Experience Goods," SoDa Laboratories Working Paper Series 2024-03, Monash University, SoDa Laboratories.
    2. Artem Kuriksha, 2021. "An Economy of Neural Networks: Learning from Heterogeneous Experiences," Papers 2110.11582, arXiv.org.
    3. Kuchler, Theresa & Pagel, Michaela, 2021. "Sticking to your plan: The role of present bias for credit card paydown," Journal of Financial Economics, Elsevier, vol. 139(2), pages 359-388.
    4. Rhys Murrian & Paul A. Raschky & Klaus Ackermann, 2024. "Friends, Key Players and the Adoption and Use of Experience Goods," Monash Economics Working Papers 2024-17, Monash University, Department of Economics.
    5. Guillermo Alves & Martín Leites & Gonzalo Salas, 2022. "See it to believe it. Experimental evidence on status good consumption among the youth," Documentos de Trabajo (working papers) 22-12, Instituto de Economía - IECON.
    6. Grieser, William & Hadlock, Charles & LeSage, James & Zekhnini, Morad, 2022. "Network effects in corporate financial policies," Journal of Financial Economics, Elsevier, vol. 144(1), pages 247-272.
    7. Han, Xintong & Li, Yushen & Wang, Tong, 2023. "Peer recognition, badge policies, and content contribution: An empirical study," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 691-707.
    8. Kuchler, Theresa & Russel, Dominic & Stroebel, Johannes, 2022. "JUE Insight: The geographic spread of COVID-19 correlates with the structure of social networks as measured by Facebook," Journal of Urban Economics, Elsevier, vol. 127(C).
    9. Bailey, Michael & Gupta, Abhinav & Hillenbrand, Sebastian & Kuchler, Theresa & Richmond, Robert & Stroebel, Johannes, 2021. "International trade and social connectedness," Journal of International Economics, Elsevier, vol. 129(C).
    10. Diemer, Andreas & Regan, Tanner, 2022. "No inventor is an island: Social connectedness and the geography of knowledge flows in the US," Research Policy, Elsevier, vol. 51(2).
    11. Barth, James R. & Hu, Qinyou & Sickles, Robin & Sun, Yanfei & Yu, Xiaoyu, 2024. "Direct and indirect impacts of natural disasters on banks: A spatial framework," Journal of Financial Stability, Elsevier, vol. 70(C).
    12. Bailey, Michael & Farrell, Patrick & Kuchler, Theresa & Stroebel, Johannes, 2020. "Social connectedness in urban areas," Journal of Urban Economics, Elsevier, vol. 118(C).
    13. Hu, Zhongchen, 2022. "Social interactions and households’ flood insurance decisions," Journal of Financial Economics, Elsevier, vol. 144(2), pages 414-432.
    14. Kariya, Ankitkumar & Shekhawat, Chhavi, 2024. "Distance lending & social connectedness," Journal of Financial Stability, Elsevier, vol. 72(C).
    15. Yilan Xu & Sébastien Box‐Couillard, 2024. "Social learning about climate risks," Economic Inquiry, Western Economic Association International, vol. 62(3), pages 1172-1191, July.
    16. Àkos Aczél & Lajos Szabó, 2023. "Birds of a feather indebted together: Peer-effects on mortgage decisions," French Stata Users' Group Meetings 2023 20, Stata Users Group.
    17. Kichko, Sergey & Picard, Pierre M., 2021. "Effect of conformism on firm selection, product quality and home bias," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 402-418.
    18. Oliver Rehbein & Simon Rother, 2020. "The Role of Social Networks in Bank Lending," ECONtribute Discussion Papers Series 033, University of Bonn and University of Cologne, Germany.

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    More about this item

    Keywords

    Peer Effects; Demand Spillovers; Social Learning;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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