Abstract
The influence of peer effects on the diffusion of innovations has been extensively studied. However, the underlying mechanisms of peer effects are generally understudied. Gaps in this knowledge could lead to misestimation of peer effects and inefficient interventions. This study examined the role of three types of specific peer effects -- information effect, experience effect, and externality effect -- in the adoption of innovation in rural China. By referring to the diffusion process of a rural innovation, we developed a simulation model that incorporated multiple peer effects on a multiplex network. The model allowed us to estimate the influence of each specific effect and to investigate the interplay of the positive and negative directions of the effects. The main results of simulated experiments were the following: (1) a negative information effect in the system caused the diffusion of innovation to vary around a middle-level rate, which resulted in a fluctuating diffusion curve rather than a commonly found S-shaped one; (2) in the case of full diffusion, experience effect significantly shaped the diffusion process at an earlier stage, while externality effect mattered more at a later stage; and (3) network properties (i.e., connectivity, transitivity, and network distance) provided indirect influence on diffusion through specific peer effects. Overall, our study illustrated the need to understand specific underlying causal mechanisms when studying peer effects. Simulation studies provide an effective approach to generate such understanding.
Highlights
Social interactions can significantly shape individuals’ economic behaviours
Experience effect and externality effect We explore how experience effect and externality effect influence the effectiveness of diffusion, which is measured by the reach of the diffusion and its speed
Peer effects are classified as information effect, experience effect, and externality effect
Summary
Social interactions can significantly shape individuals’ economic behaviours. This is especially true when an individual behaves upon situations with uncertainties. An individual’s decision on whether to adopt an innovation (i.e. the idea, practice, or object that are perceived as new (Rogers 2003)) often depends on the decisions of their friends, relatives, colleagues, etc Such social influence is referred to as peer effects. This paper use the case of the diffusion of a high-value crop (a crop with high economic return) in 10 villages in rural China to demonstrate multiple types of peer effects in the adoption of an innovation The farmers in these villages traditionally farmed staple rice and cotton. As the farmers were not certain about the profitability of farming a new crop, there were only one or two households in each village (the average number of households was 37, with a standard deviation of 14) who adopted in the first year These earlier adopters were mainly motivated by the awareness information they obtained. Their adoption behaviour was the result of the information effect
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