International Journal of Internet, Broadcasting and Communication

The Institute of Internet, Broadcasting and Communication (한국인터넷방송통신학회)
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Assessing the Impact of Network Effects on Brand Choice in the Growth Market: A Multi-Brand Diffusion Model

  • Seungyoo Jeon (Department of Financial Technology Convergence, Soongsil University)
  • Received : 2023.10.05
  • Accepted : 2023.10.28
  • Published : 2023.11.30
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Abstract

This study investigates network effects to measure how strongly the early adopters affect the brand choice of the potential consumer. By using the Gumbel-Hougaard (GH) copula, this study checks the magnitude of network effects varied from country to country. To consider consumer heterogeneity and network effects in the growth market, this study proposes the multi-brand Gamma/Shifted-Gompertz (m-G/SG) model based on the GH copula. Out of eighteen Western European cellular phone market data and South Korea smartphone data sets, the m-G/SG model provides an improvement in the estimation accuracy over the Libai, Muller, and Peres model. The results show that network effects enhance (i) the polarization of brand choice probabilities as time elapses; (ii) the dominance of the more preferred and the earlier entered brand; and (iii) the deceleration of category-level diffusion. Potential followers can analyze their relationship with earlier entrants through the m-G/SG model and also establish an optimal market entry strategy.

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