Peer Influence and Homophily in the Diffusion of the iPhone 3G in a Very Large Social Network

This paper studies the effects of peer influence and homophily on the diffusion of the iPhone 3G across a number of communities sampled from a large dataset from a major European Mobile carrier in one country. We use Stochastic Actor Based Models to capture the co-evolution of the social network as well as the dynamics of adoption. This helps to separate the roles of homophily and peer influence in the process of diffusion. We provide evidence that the propensity of a subscriber to adopt, when she is called upon to make a decision about whether she should adopt, increases with the number of friends that have already adopted. A one standard deviation increase above the mean in the number of friends that had already adopted increases the likelihood odds of adoption relative to no adoption by a factor of 2.8. The effect of peer influence is robust across a number of different specifications. The results for the effect of homophily are less clear. While, on average, we find a positive significant effect of adoption on tie formation, in many communities this effect is significant and negative and in others there is no effect at all.