Abstract
The theoretical literature on platforms and network effects predicts that initial growth of a platform depends on the market’s expectations of future installed base. This paper tests this claim, reporting on a field experiment in which invitations to join a newly launched platform were sent to 16,349 individuals and included randomized statements regarding the future expected installed base (along with disclosures of the current installed base). This study’s results affirm this theory, contribute greater understanding of the nature and importance of expectations, and reveal that market expectations can be influenced.
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