(The) effect of network structure on product diffusion under network externalities

Abstract

This thesis focused on the effects of the social network structure on the extent of innovative products diffusion under network externalities. Different from previous network externalities models, we assume a sparse network structure. Due to the nature of this network structure, consumer’s information such as market shares of competing technologies is biased. Such a bias may lead the consumer to behave differently from the case in previous models. It will be shown that the monopoly outcome in the previous models will be preserved when the network structure allows consumers to obtain unbiased information through social interaction. On the other hand, the evolution of competing technologies will result in market sharing when consumer’s interaction is coupled in such a way that consumers obtain a local bias.