Local Network Effects in the Adoption of a Digital Platform*

Abstract

We examine the extent to which network effects on a digital platform are geographically local. Focusing on the fantasy sports market, we find that the size of a county's existing user base on the platform significantly impacts the number of new adopters in that county, while the size of the user base in nearby counties does not. We also find evidence that network effects are heterogenous across income levels. Guided by these results, we demonstrate that the initial distribution of users across counties can significantly influence the growth of the network over time, and draw implications for optimal seeding strategies.