Peer Effects in Product Adoption

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.

Automated summary

This study uses de-identified data from Facebook to examine peer effects in the cell phone market. The results show that a friend's purchase of a new phone has a significant and persistent impact on an individual's demand for phones of the same brand. At the same time, a friend's purchase of a particular phone brand can reduce an individual's demand for phones from competing brands, especially if they operate on different operating systems.