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Friends, Key Players and the Adoption and Use of Experience Goods

Author

Listed:
  • Rhys Murrian

    (Department of Economics and SoDa Labs, Monash University)

  • Paul A. Raschky

    (Department of Economics and SoDa Labs, Monash University)

  • Klaus Ackermann

    (Department of Econometrics and Business Statistics and SoDa Labs, Monash University)

Abstract
This paper empirically investigates how an individual’s network influences their purchase and subsequent use of experience goods. Utilising data on the network and game-ownership of over 108 million users from the world’s largest video game platform, we analyse whether a user’s friendship network influences their decision to purchase single-player video games. Our identification strategy uses an instrumental variable (IV) approach that employs the temporal lag of purchasing decisions from second degree friends. We find strong peer effects in the individual game adoption in the contemporary week. The effect is stronger if the friend who purchased the game is an old friend compared to a key player in the friendship network. Comparing the results to adoption decisions for a major label game, we find peer effects of a similar size and duration. However, the time subsequently spent playing the games is higher for players who were neither influenced by a peer who is a key player nor an old friend. Considering the increasing importance of online networks on consumption decisions, our findings offer some first insights on the heterogeneity of peer effects between old and key player friends and also provide evidence in consumers' biases in social learning.

Suggested Citation

  • 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.
    • Handle: RePEc:ajr:sodwps:2024-03
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    More about this item

    Keywords

    networks; experience goods; product adoption; taste projection;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

    NEP fields

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