A Structural Model of Network Dynamics: Tie Formation, Product Adoption, and Content Generation
By Mina Ameri (University of Texas), Elisabeth Honka (University of California) & Ying Xie (University of Texas)
Abstract: We develop a structural model for the co-evolution of individuals’ friendship tie formations and their concurrent online activities (product adoptions and production of user-generated content) within a social network. Explicitly modeling the endogenous formation of the network and accounting for the interdependence between decisions in these two areas (friendship formations and concurrent online activities) provides a clean identification of peer effects and of important drivers of individuals’ friendship decisions. We estimate our model using a novel data set capturing the continuous development of a network and users’ entire action histories within the network. Our results reveal that, compared to a potential friend’s product adoptions and content generation activities, the total number of friends and the number of common friends this potential friend has with the focal individual are the most important drivers of friendship formation. Further, while having more friends does not make a person more active, having more active friends does increase a user’s activity levels in terms of both product adoptions and content generation through peer effects. Via counterfactuals we assess the effectiveness of various seeding and stimulation strategies in increasing website traffic while taking the endogenous network formation into account. We find that seeding to users with the most friends is not always the best strategy to increase users’ activity levels on the website.
Full Article: Social Science Research Network