Pantelis Analytis, Mehdi Moussaïd, Hrvoje Stojic
Paper #: 15-06-023
A few “hit" cultural products tend to dominate consumer attention. Yet, it is notoriously hard to predict ex ante which products will become “hits". What are the decision-making processes that lead to these patterns of collective behavior? We advance a novel process model in which agents with diverse yet correlated preferences search the alternatives in order of popularity and choose the first alternative with utility higher than a certain satisficing threshold. The model goes beyond existing accounts of the popularity dynamics in that (i) it suggests a cognitive process through which social influence plays out in these markets, (ii) it allows us to study how inequality and unpredictability in the market change as a function of the diversity of preferences in the consumer population and the satisficing threshold, (iii) it is amenable to welfare analysis, and (iv) it facilitates comparisons with scenarios without social influence. In agent-based simulations we found that social influence led to an increase in inequality and unpredictability in the market, especially when agents employed a low satisficing threshold. In addition, we found that social influence led to a larger increase in the average consumer welfare when there was at least some diversity of preferences among consumers.