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Growing Two-Sided Networks by Advertising the User Base: A Field Experiment Catherine Tucker and Juanjuan Zhang Marketing Science, 2010, 29(5), pp. 805-814. Many networks advertise the size of their user base It is unclear how potential customers would respond • Suppose a network advertises having many existing sellers. How would potential sellers respond? 1. Worry about competition Less likely to enter 2. Infer that demand is high More likely to enter We disentangle these two effects with a field experiment • Randomize: 1. Whether to display the existing number of sellers and/or buyers on the network 2. The number of sellers/buyers, if displayed Findings: the two effects coexist • When the numbers of sellers and buyers are both displayed, a large number of sellers deters further seller entry • This deterrence effect disappears when the number of sellers is presented in isolation (new sellers infer demand from competition) • The demand-inference effect is stronger when there is greater demand uncertainty Takeaways • Suggest a cost-effective growth strategy for networks – Emphasize competitive information to potential customers who know less about demand • Emphasize a nuanced interpretation of competition – It hurts profits but signifies market potential