Capturing the Effects of Network Size and Social Distance on Choice Probabilities in Social Network

Abstract

It is widely known that consumer choice behavior is largely affected by other consumers, especially in products/services with network effects. This study focuses on capturing the effects of network size and social distance of other consumers on choice probabilities in social network. Motivation of choice and knowledge level of consumer are considered as moderating variables. Multinomial logit model was utilized to analyze choice-based conjoint data. The result shows that as the size of network grows, the probability of choice of agents in the social network increases. Also, the effect of network size decreases as the social distance increases. Utilitarian-oriented consumers are more susceptible to the network size of Korean population and hedonic-oriented consumers are more susceptible to the network size of friends & family. The contributions of this study are as follows: First, it introduced network variables that try to explain one of the most significant determinants when consumer make choices on products/services with network externalities. This study measures the effects of network structure, both network size and social distance, on choice decision. In addition, some new determinants that may influence on social choice decision were considered. Many sociodemographic factors have been considered in social network analyses but constructs such as usage motivation and knowledge level have rarely been used in choice model.