Peer effect of iPhone adoptions on social networks

This paper studies the peer effect of iPhone adoptions in China. We use a unique data set of iPhone adoption records from a provincial capital city in China, in a span of over four years starting from iPhone's first introduction to mainland China. We construct a social network using six month's call transactions among iPhone adopters and all other users on the carrier's network, with strength of social ties measured by duration of calls. Based on the network structure, we test whether an individual's adoption decision is influenced by his friends' adoptions. A fixed-effect model shows that, on average, a friend's adoption increases an individual's adoption probability in next month by 0.89%, and the marginal effect decreases in the size of his current neighboring adopter-base. To further control for potential time-varying correlated unobservables, we instrument adoptions of one's friends by their birthdays, and the IV estimation shows a slightly bigger peer effect at 0.94%. We also investigate how network structures modulate the magnitude of peer influence. Our results show that peer effect is stronger when the influencer has a stronger relationship with the influencee or when he has less friends