Growing Two-Sided Networks by Advertising the User Base: A Field Experiment Catherine Tucker and...
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Transcript of Growing Two-Sided Networks by Advertising the User Base: A Field Experiment Catherine Tucker and...
![Page 1: 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.](https://reader035.fdocuments.us/reader035/viewer/2022080914/56649cee5503460f949bb5a9/html5/thumbnails/1.jpg)
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.
![Page 2: 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.](https://reader035.fdocuments.us/reader035/viewer/2022080914/56649cee5503460f949bb5a9/html5/thumbnails/2.jpg)
Many networks advertise the size of their user base
![Page 3: 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.](https://reader035.fdocuments.us/reader035/viewer/2022080914/56649cee5503460f949bb5a9/html5/thumbnails/3.jpg)
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
![Page 4: 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.](https://reader035.fdocuments.us/reader035/viewer/2022080914/56649cee5503460f949bb5a9/html5/thumbnails/4.jpg)
We disentangle these two effects with a field experiment
• Randomize:1. Whether to display the existing number of sellers
and/or buyers on the network2. The number of sellers/buyers, if displayed
![Page 5: 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.](https://reader035.fdocuments.us/reader035/viewer/2022080914/56649cee5503460f949bb5a9/html5/thumbnails/5.jpg)
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
![Page 6: 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.](https://reader035.fdocuments.us/reader035/viewer/2022080914/56649cee5503460f949bb5a9/html5/thumbnails/6.jpg)
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