| By: |
Eyal Carmi (Tel Aviv University);
Gal OEstreicher-Singer (Tel Aviv University);
Arun Sundararajan (New York University) |
| Abstract: |
We study the online contagion of exogenous demand shocks generated by book
reviews featured on the Oprah Winfrey TV show and published in the New York
Times, through the co-purchase recommendation network on Amazon.com. These
exogenous events may ripple through and affect the demand for a “network” of
related books that were not explicitly mentioned in a review but were located
“close” to reviewed books in this network. Using a difference-in-differences
matched-sample approach, we identify the extent of the variations caused by
the visibility of the online network and distinguish this effect from
variation caused by hidden product complementarities. Our results show that
the demand shock diffuses to books that are up to five links away from the
reviewed book, and that this diffused shock persists for a substantial number
of days, although the depth and the magnitude of diffusion varies widely
across books at the same network distance from the focal product. We then
analyze how product characteristics, assortative mixing and local network
structure, play a role in explaining this variation in the depth and
persistence of the contagion. Specifically, more clustered local networks
“trap” the diffused demand shocks and cause it to be more intense and of a
greater duration but restrict the distance of its spread, while less clustered
networks lead to wider contagion of a lower magnitude and duration. Our
results provide new evidence of the interplay between a firm’s online and
offline media strategies and we contribute methods for modeling and analyzing
contagion in networks. |
| Keywords: |
networks, product networks, electronic commerce, ecommerce, recommender systems, identification, exogenous shocks |
| JEL: |
L11 L81 M31 |
| Date: |
2010–09 |
| URL: |
http://d.repec.org/n?u=RePEc:net:wpaper:1018&r=cul |