Adoption with Social Learning and Network Externalities*

Abstract

We examine patterns of adoption of a new airtime transfer service over time. We document a strong positive correlation between own adoption and increased usage of the new airtime transfer platform by social neighbours. We examine the possible sources of this correlation by distinguishing between network externalities that extend after adoption and social learning that stops after adoption. We find no correlation between usage by social neighbours and own usage after first adoption. We conclude that social learning about the existence and quality of a new product platform are important mechanisms in its diffusion.