We analyze the effect of peer influence on the diffusion of an innovative network good. We argue that the adopters of a network good have an incentive to convince others to purchase the same product because their utility depends on the number of other users. This peer-effect influences...

Network externalities spur the growth of networks and the adoption of network goods in two ways. First, they make it more attractive to join a network the larger its installed base. Second, they create incentives for network members to actively recruit new members. Despite indications that the...

We analyze the effect of peer influence on the diffusion of an innovative network good, argu-ing that the adopters of a network good have an incentive to convince others to purchase the same product because their utility depends on the number of other users. This peer-effect influences...