Dynamic pricing of network goods with boundedly rational consumers.

We present a model of dynamic monopoly pricing for a good that displays network effects. In contrast with the standard notion of a rational-expectations equilibrium, we model consumers as boundedly rational and unable either to pay immediate attention to each price change or to make accurate forecasts of the adoption of the network good. Our analysis shows that the seller's optimal price trajectory has the following structure: The price is low when the user base is below a target level, is high when the user base is above the target, and is set to keep the user base stationary once the target level has been attained.

Distinguishing influence-based contagion from homophily-driven diffusion in dynamic networks.

Node characteristics and behaviors are often correlated with the structure of social networks over time. While evidence of this type of assortative mixing and temporal clustering of behaviors among linked nodes is used to support claims of peer influence and social contagion in networks, homophily may also explain such evidence. Here we develop a dynamic matched sample estimation framework to distinguish influence and homophily effects in dynamic networks, and we apply this framework to a global instant messaging network of 27.