Harshit's review on network effects and viral marketing in media industries
The following papers were covered during the review:
- Experimental Study of Inequality and Unpredictability in an Artificial Cultural Market. Science. 2006.
- Leading the Herd Astray: An Experimental Study of Self-fulfilling Prophecies in an Artificial Cultural Market. Social Psychology Quarterly, 2008
- Bose-Einstein Dynamics and Adaptive Contracting in the Motion Picture Industry. The Economic Journal. 1996.
- Word of Mouth for Movies: Its Dynamics and Impact on Box Office Revenue. Journal of Marketing. 2006.
Luck and skills, and can they be separated? Two experiments in an artificial world.
The first set of experiments was already covered in the lectures. In this study more than 14000 participants registered the website Music Lab and were asked to listen to, rate and, if they chose, download songs by bands they had never heard of. Some of the participants saw only the names of the songs and bands, while others also saw how many times the songs had been downloaded by previous participants. The results showed that people could be people could be easily influenced by even a little social feedback and led to believe mediocre songs to be the most interesting.
Another set of this work covered in the later paper (Leading the Herd Astray) was trying to invert the popularity of the set of songs and observing what happens. The conclusions coincided with that of the previous work- a false inverted popularity becomes real under the social feedback. Though because of this inversion people downloaded less music and finally the best songs regained their popularity. But it should be noted that this was a simplistic simulation of the world, and in the real world with more songs being available every day, even the best songs which simply lost due to luck may not be able to regain their expected status ever.
Information cascades and uncertainty in Hollywood, or "No one knows anything"
In the paper on Bose-Einstein dynamics, De Vany models a movie goer as a Bayesian Movie Buff- someone who makes her choice of going to a movie based on the information she gets from others. This information on the quality of the movie becomes stronger when more information is at hand, and so is more likely to go to a movie on which she has more information. On modeling this process, they observe that the probability of movie goer to watch she has not watched before follows Bose-Einstein dynamics. Based on the Variety Movie dataset they confirm that movie revenues infact do follow Bose-Eienstein dynamics as opposed to other possible hypotheses like geometric growth and random stochastic process.
In their next work Word of Mouth for Movies the authors analyze the role of star power, and test whether success of a movie can be predicted. They find that in all cases the distributions have an infinite variance and though the average of star movies is higher, even they are equally unpredictable. They say that movie executives may think that they can control how the movie works out using their smarts, but it is an futile exercise in illussion of the control. Forecasts and greenlighting may generally be meaningless. I would end up with two powerful quotes by William Goldman.
“As far as the filmmaking process is concerned, stars are essentially worthless -- and absolutely essential.”
"With all due respect, nobody knows anything."
- Strogatz, Steven H. 1994. Nonlinear Dynamics and Chaos. Reading, MA: Perseus.
- Huang, Jen-Hung and Yi-Fen Chen. 2006. “Herding in Online Product Choice.” Psychology & Marketing 23(5):413–28.
- Stewart-Williams, Steve and John Podd. 2004. “The Placebo Effect: Disolving the Expectancy Versus Conditioning Debate.” Psychological Bulletin 130(2):324–40.
Interesting economic life and market reads
The paper by Mandelbrot was almost a breakthrough and finally led him to fractals and his paper How Long Is the Coast of Britain?.
- Albert, S. 1998. “Movie Stars and the Distribution of Financially Successful Films in the Motion Picture Industry”. Journal of Cultural Economics 22 (4): 249–270.
- Mandelbrot, B. 1963. “The Variation of Certain Speculative Prices”. Journal of Business 36: 394–419.
- De Vany, A. 1976. Uncertainty, waiting time and capacity utilization- A stochastic theory of product quality. Journal of Political Economy, 84:523-541.