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Overview: The network benefits of new technologies are often modeled as depending on the total number of users in a network. However, it is common in networks for only small subsets of network users to interact. Exogenous shocks to the benefits of watching TV are used to identify the causal (network) effect of changes in the installed base on adoption decisions. The author find evidence that network effects are based on interactions, and that potential adopters only react to adoption by people they wish to communicate with.
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