Social Interaction Effects

Social Interaction Effects

Erik den Hartigh (Delft University of Technology, The Netherlands)
Copyright: © 2008 |Pages: 5
DOI: 10.4018/978-1-59904-885-7.ch191
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Abstract

Direct social interactions between economic agents (people) are important in determining their choices. When choosing a new car, you will likely ask some of your friends or acquaintances what their opinion is on different types and brands of cars. When choosing a new photo camera, you are likely to visit an Internet forum to see what other peoples’ opinions are on the different brands and types of cameras. These are examples of social interaction. Social interaction effects are therefore important in determining buying behavior. The rise of the Internet has considerably facilitated such social interactions, making social interaction effects even more important.

Key Terms in this Chapter

Social Network Risk: The risk of buying a product of the “wrong” fashion style or a product that appeals to the “wrong” social group.

Social Interaction Effects: Occur when an economic agent’s preference for a product or technology is dependent upon the opinions or expectations of other economic agents. It is also referred to by others as social network effects or social contagion.

Methodological Individualism: A philosophical method aimed at explaining and understanding broad society-wide developments as the aggregation of decisions by individuals.

Economic Network Risk: The risk of buying a product based on technology that will not become a market standard—and therefore of less value.

Market Mavens: Defined as “individuals who have information about many kinds of products, places to shop and other facets of markets and initiate discussions with consumers and respond to requests from consumers for market information” (Feick et al., 1987, p.85) (i.e., people who convey information to others that is not necessarily related to an individual product).

Self-Reinforcing Expectations: Occur when a customer’s purchase intention, or a supplier’s supply intention, is dependent on the expectations of other (potential) customers and suppliers.

Information Exchange: Occurs when a customer’s purchase intention, or a supplier’s supply intention, is dependent on the opinions of other (potential) customers and suppliers.

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