Modeling Product Choices in a Peer Network

Abstract

Abstract Consumers are uncertain about their preferences for innovative product attributes until the first trial. They search for information as a means of reducing uncertainty and improving the likelihood that they will be satisfied with their purchase. One way to receive information is through peer networks. As a peer network is often a priori unknown, we conduct an experiment to solicit self-reported peer nominations. We compare two mechanisms through which peer networks operate: Strength of social ties and perceived peer expertise, to draw inferences regarding consumers’ preference reversal after exposure to peer recommendations. Our results indicate that perceived source expertise influences preferences while the closeness of social relationships has no statistically significant impact.