Essays on the Social Consumer : Peer Influence in the Adoption and Engagement of Digital Goods

In this dissertation, I study how consumers influence each other in the adoption and engagement of digital goods. In the first essay, I study peer influence in mobile game adoption. Although peer effects are expected to influence consumer decisions, they are difficult to identify in observational studies due selection bias: Friends share common characteristics and behave in similar ways even without peer effects. I use a novel approach to estimate unobserved characteristics which endogenously drive tie formation and use the estimates to control for selection, without need for instruments. This is the first paper to use latent space to reduce bias in peer influence estimates. I find that peers account for 27% of mobile game adoptions, and that ignoring latent homophily would bias the estimates by 40%, in line with previous studies. In some samples, ignoring latent homophily can result in overestimation of social effects by over 100%. In the second essay, I examine the effect of zero rating on consumer behavior in a social network. I use Facebook data on millions of users to quantify direct, peer, and long-term effects of zero rating, a campaign where consumers can access digital media over mobile networks for free, on social network activities. I find that zero rating does not have the same effect on all social network activities. While the direct impact of zero rating is positive on all activities, users with more friends on zero rating create less, consume more, and give more feedback on content. In addition, zero rating does not have a uniform effect across consumers. Some consumers benefit more from zero rating than others, and I show that network characteristics can help identify those consumers whose network benefits the most from zero rating