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Network Diffusion and Gaming (and some Cascades)

(debate regarding buying consoles because more friends have it vs. the one you like more).

Let’s say you want to buy a video game console, such as a PlaySation 4 or an Xbox One. You like the Xbox One better, but a certain fraction of your friends are have the PlayStation 4 and you plan to do buy games with multiplayer capabilities. At this point, you would ask yourself “Am I willing to compromise my personal preferences so that I can play with friends?” If you ask, some will say no, some would say yes and the rest will be unsure. We can model this with a graph connecting you and your friends and assume that no one has both the Xbox One or the PlayStation 4. Some initially adopt (or buy) the Xbox One and others initially adopt (or buy) the PlayStation 4.

The threshold, q, is dependent on the person deciding to buy the product. However, lets say that it is just above 1/2 (ex. 0.51), meaning that if his friends are evenly split, then he is just barely willing to buy the Xbox One. The threshold can vary because different factors such as price, support and features can change one’s decision, but those are omitted for the sake of simplicity. Using this simple model, if 70 percent of his friends have a PlayStation 4, then he will buy a PS4 because the he can play multiplayer games with more people.

More generally, the amount of people who adopt a product initially may infer something about the quality of a product. The Xbox might be a better choice according to critics, but more people use the PlaySation 4. In the short term, reviews from critics are influential because few people have the product. In the long term, as sales/popularity data become available, the influence from critic reviews from launch time (which was in 2013 in the case of these consoles) decrease and individual considerations become evident.


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November 2018