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Social Networks and New Product Choice

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  • Timothy J. Richards
  • Stephen F. Hamilton
  • William J. Allender

Abstract

To successfully market new products in a social network it is essential to identify influential individuals whose product recommendations influence the consumption choices of their peers. In this study, we use spatial econometric methods to determine how individuals revise their preferences for product attributes when exposed to product recommendations from peers, and how different individuals who vary in their degree of network connectedness exert influence on the product choices of others. We find evidence that consumers look to others for guidance from peers in their preference for subjective, taste-specific parameters, but tend not to respond to peer price choices. Our spatial methods allow us to empirically determine the influence exerted by individual members on the consumption choices of other members of the social network. We find that connected members of the social network are not always the most influential in revising the consumption choices of others. Our estimates reveal that network proximity explains only 8.8% of influence.

Suggested Citation

  • Timothy J. Richards & Stephen F. Hamilton & William J. Allender, 2014. "Social Networks and New Product Choice," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(2), pages 489-516.
    • Handle: RePEc:oup:ajagec:v:96:y:2014:i:2:p:489-516.
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    1. Conrad Murendo & Meike Wollni & Alan De Brauw & Nicholas Mugabi, 2018. "Social Network Effects on Mobile Money Adoption in Uganda," Journal of Development Studies, Taylor & Francis Journals, vol. 54(2), pages 327-342, February.
    2. Bonnet, Céline & Richards, Timothy J., 2016. "Models of Consumer Demand for Differentiated Products," TSE Working Papers 16-741, Toulouse School of Economics (TSE).
    3. Bruno Wichmann & Minjie Chen & Wiktor Adamowicz, 2016. "Social Networks and Choice Set Formation in Discrete Choice Models," Econometrics, MDPI, vol. 4(4), pages 1-26, October.
    4. Tavárez, Héctor & Elbakidze, Levan, 2019. "Valuing recreational enhancements in the San Patricio Urban Forest of Puerto Rico: A choice experiment approach," Forest Policy and Economics, Elsevier, vol. 109(C).
    5. Langer, Melissa & Davidson, Kelly A. & McFadden, Brandon & Messer, Kent D., 2020. "Evaluating the Effects of Peer Information and Social Influence on Food Purchase in Social Settings," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304536, Agricultural and Applied Economics Association.
    6. Emiliano Brancaccio & Raffaele Giammetti & Milena Lopreite & Michelangelo Puliga, 2023. "Convergence in solvency and capital centralization: A B‐VAR analysis for high‐income and euro area countries," Metroeconomica, Wiley Blackwell, vol. 74(1), pages 40-73, February.
    7. Habtamu Tilahun Kassahun & Bo Jellesmark Thorsen & Joffre Swait & Jette Bredahl Jacobsen, 2020. "Social Cooperation in the Context of Integrated Private and Common Land Management," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(1), pages 105-136, January.
    8. Bazzani, Claudia & Nayga, Rodolfo M. Jr. & Caputo, Vincenzina & Canavari, Maurizio & Danforth, Diana M., 2016. "On the Use of the BDM Mechanism in Non-Hypothetical Choice Experiments," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235904, Agricultural and Applied Economics Association.
    9. Ozge Dinc‐Cavlak & Ozlem Ozdemir, 2021. "Comparing the willingness to pay through three elicitation mechanisms: An experimental evidence for organic egg product," Agribusiness, John Wiley & Sons, Ltd., vol. 37(4), pages 782-803, October.
    10. Fang, Di & Richards, Timothy, 2016. "New Maize Variety Adoption in Mozambique: A Spatial Approach," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235388, Agricultural and Applied Economics Association.
    11. Maurizio Canavari & Andreas C. Drichoutis & Jayson L. Lusk & Rodolfo M. Nayga, Jr., 2018. "How to run an experimental auction: A review of recent advances," Working Papers 2018-5, Agricultural University of Athens, Department Of Agricultural Economics.
    12. Dubey, Subodh & Sharma, Ishant & Mishra, Sabyasachee & Cats, Oded & Bansal, Prateek, 2022. "A General Framework to Forecast the Adoption of Novel Products: A Case of Autonomous Vehicles," Transportation Research Part B: Methodological, Elsevier, vol. 165(C), pages 63-95.
    13. Miguel Angel de la Llave Montiel & Fernando López, 2020. "Spatial models for online retail churn: Evidence from an online grocery delivery service in Madrid," Papers in Regional Science, Wiley Blackwell, vol. 99(6), pages 1643-1665, December.
    14. Hübler, Michael, 2015. "Labor mobility and technology diffusion: A new concept and its application to rural Southeast Asia," Journal of Asian Economics, Elsevier, vol. 39(C), pages 137-151.
    15. Mulu Debela Ofolsha & Fekadu Beyene Kenee & Dawit Alemu Bimirew & Tesfaye Lemma Tefera & Aseffa Seyoum Wedajo, 2022. "The Effect of Social Networks on Smallholder Farmers’ Decision to Join Farmer-Base Seed Producer Cooperatives (FBSc): The Case of Hararghe, Oromia, Ethiopia," Sustainability, MDPI, vol. 14(10), pages 1-19, May.
    16. Di Fang & Timothy J. Richards, 2018. "New Maize Variety Adoption in Mozambique: A Spatial Approach," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 66(3), pages 469-488, September.
    17. Ashutosh Tiwari & Timothy J. Richards, 2016. "Social Networks and Restaurant Ratings," Agribusiness, John Wiley & Sons, Ltd., vol. 32(2), pages 153-174, April.

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