Alexia Gaudeul

The role of reciprocation in social network formation, with an application to LiveJournal

Abstract This paper deals with the role of reciprocation in the formation of individuals’ social networks. We follow the activity of a panel of bloggers over more than a year and investigate the extent to which initiating a relation brings about its reciprocation. We adapt a standard capital investment model to study how reciprocation affects the build-up of the individual social capital of bloggers, as measured by their links and interactions with others. This allows us to measure the role of content production and relationship building in the dynamics of online social networks and to distinguish between the social networking and media aspects of blogging.

Software marketing on the Internet: the use of samples and repositories

This paper examines one of the most important marketing strategies by software producers on the Internet. That is whether to offer free samples and if so, whether to list the samples on shareware repositories. I show that firms with higher value products have a greater incentive to offer free samples but are more reluctant to do so if they are well known, and even when they do are less likely to be listed on shareware repositories. I then proceed to use four types of Probit-based models to corroborate the findings from the theoretical model.

Public Provision of a Private Good: What is the Point of the BSD License?

Software is a potentially excludable public good. It is possible, at some cost, to exclude non-paying users from its consumption by using copyright law or technological restraints. Licensing the software under proprietary license terms makes of it a private good, licensing it under the BSD does not change the economic nature of the software while licensing it under the GPL artificially makes of it a pure public good. A project leader will prefer one or the other of those license terms depending on her software project’s market potential and on the cost of developing it. The optimal licensing for a sequence of cumulative innovations and the impact of possible competition between rival software development teams are considered.

Choosing whether to compete: Price and format competition with consumer confusion

We run a market experiment where firms can choose not only their price but also whether to present comparable offers. They are faced with artificial demand from consumers who make mistakes when assessing the net value of products on the market. If some offers are comparable however, some consumers favor the best of the comparable offers vs. non-comparable offers. We vary the number of such consumers as well as the strength of their preferences for the best of the comparable offers. In treatments where firms observe the past decisions of their competitors, firms learn not to present comparable offers especially when many consumers prefer comparable offers. This occurs after initial periods with strong competition and leads to lower welfare for all consumers. In treatments where firms cannot monitor the competition, firms end up having to present comparable offers, which leads to an improvement in welfare for all consumers.

Consumer Welfare and Market Structure in a Model of Competition between Open Source and Proprietary Software

I consider a Vickrey-Salop model of spatial product differentiation with quasi-linear utility functions and contrast two modes of production, the proprietary model where entrepreneurs sell software to the users, and the open source model where users participate in software development. I show that the OS model of production may be more efficient from the point of view of welfare that the proprietary model, but that an OS industry is vulnerable to entry by entrepreneurs while a proprietary industry can resist entry by OS projects. A mixed industry where OS and proprietary development methods coexist may exhibit large OS projects cohabiting with more specialized proprietary projects, and is more efficient than the proprietary model of production from the point of view of welfare.

Testing the strength and robustness of the attraction effect in consumer decision making

We report the results of an original experiment that was designed to test the strength and robustness of the attraction effect. Rather than the usual simple tests for this effect, we consider a conceptually simple consumer purchasing task where alternatives are however difficult to evaluate. For the attraction effect to be observed, the consumer must go through two steps: the first is to find out that two or more options are comparable, which leads him to exclude the dominated alternatives. The second is to favor the dominant option over those that are not comparable. Our experiment allows us to determine whether and how many individuals stop before each of those two steps. The results confirm the existence of an attraction effect in our setting, but the effect is not strong. Indeed, only a minority of subjects perform the second step. The effect is not robust to introducing larger differences in prices among options and to widening the range of options to choose from. We conclude by showing that our subjects would benefit from relying more on performing asymmetric dominance editing rather than on their skills in the purchasing task.

Blogs and the Economics of Reciprocal Attention

Blogs differ from other media in that authors are usually not remunerated and inscribe themselves in communities of similarly minded individuals. Bloggers value reciprocal attention, interaction with other bloggers and information from reading other blogs; they value being read but also writing itself, irrespective of an audience. A novel dataset from a major blogging community, LiveJournal, is used to verify predictions from a model of social networking. Content production and blogging activity are found to be related to the size and degree of asymmetry of the relational networks in which bloggers are inscribed.

Choosing not to compete: Can firms maintain high prices by confusing consumers?

Firms with very similar products often present their products in different ways. This makes it difficult for consumers to find out which product fits their needs best, or which one is the cheapest. Why is there no convergence toward common ways to present products? Is it possible for firms to maintain high prices by confusing consumers? We run a market experiment to investigate those questions. In our market, firms choose how to present their products in addition to choosing their price. We find that firms maintain different ways to present their products and that this allows them to maintain high prices. This behavior is not consistent with competitive behavior, such as when firms adopt best responses to each other, imitate the most successful firm, or learn the best strategy over time. Rather, our results are only consistent with cooperation between firms. Firms cooperate by not imitating the way other firms present their products. Cooperation is maintained by the threat of tough competition if a firm makes its product easy to compare with others. Firms are all the more likely to maintain such cooperation if their products do not actually differ much. This is because in that case, maintaining differences in the presentation of their products is the only way to maintain profits.

The relation between privacy protection and risk attitudes, with a new experimental method to elicit the implicit monetary value of privacy

We investigate the decision of experimental subjects to incur the risk of revealing personal private information to other participants. We do so by using a novel method to generate personal information that reliably induces privacy concerns in the laboratory. We show that individual decisions to incur privacy risk are correlated with decisions to incur monetary risk. We find that partially depriving subjects of control over the revelation of their personal information does not lead them to lose interest in protecting it. We also find that making subjects think of privacy decisions after financial decisions reduces their aversion to privacy risk. Finally, surveyed attitude to privacy and explicit willingness to pay or to accept payment for personal information correlate well with willingness to incur privacy risk. Having shown that privacy loss can be assimilated to a monetary loss, we compare decisions to incur risk in privacy lotteries with risk attitude in monetary lotteries to derive estimates of the implicit monetary value of privacy. The average implicit monetary value of privacy is about equal to the average willingness to pay to protect private information, but the two measures do not correlate at the individual level. We conclude by underlining the need to know individual attitudes to risk to properly evaluate individual attitudes to privacy as such.

Of the Stability of Partnerships When Individuals Have Outside Options, or Why Allowing Exit is Inefficient

Should people be allowed to leave joint projects freely or should they be deterred from breaking off? This depends on why people stop collaborating and whether they have good reasons to do so. We explore the factors that lead to the breakdown of partnerships by studying a public good game with imperfect public monitoring and an exit option. In our experiment, subjects were assigned a partner with whom they could contribute over several periods to a public good with stochastic outcomes. They could choose in each period between participating in the public project or working on their own. We find there was excessive exit especially because subjects over-estimated the likelihood their partner would leave. Treatments with high barriers to exit generated higher welfare overall as they fostered stability and prevented inefficient breakdowns in relationships. There were differences across treatments in the intensity with which different factors drove the choice to work alone. Differences in expected payoffs between independent and group work were more important as a driver of exit in treatments with low barriers to exit. The intensity of other factors was more constant across treatments, including whether the common project failed in the previous period, the belief that ones partner did not want to maintain the partnership and the belief that he exerted less effort than oneself.