Heads or Tails? Network Effects on Game Purchase Behavior in The Long Tail Market

Abstract

Abstract-This study aims to uncover the effects of network effects, namely the social influence and network externalities, on purchasing of digital goods. We are particularly interested in the differences in network effects in long tail versus the head of the market. We used a novel dataset from an online game distribution platform covering 1975 games and 8000 users in this study. The results reveal that network effects are more pronounced for the tail of the market in comparison to the head of the market. For the games that are in the head of the market the popularity may be more significantly influenced by factors unobserved in this study (such as advertising budget) yet the games in the tail benefited greatly from any change to the network effects. The exception was social games. The games that relied on user to user engagement did not fare well in the tail of the market. This study contributes to the literature on network effects and long tail market literature by highlighting the differential effects in different segments of the market.