Peer Effects in the Diffusion of Innovations: Theory and Simulation

31 Pages Posted: 2 Jun 2015 Last revised: 14 Mar 2016

See all articles by Hang Xiong

Hang Xiong

ETH Zurich; King's College London

Diane Payne

UCD School of Sociology, Dynamics Lab,

Stephen Kinsella

University of Limerick

Date Written: March 2, 2015


This paper presents a research framework for studying peer effects in the diffusion of innovations. The underlying mechanisms of peer effects are generally under-discussed in existing studies. By investigating diffusion processes in the real world and reviewing previous studies, we find that information transmission, experience sharing and externalities are the basic mechanisms through which peer effects occur. They are termed as information effect, experience effect and externality effect, respectively. The three effects could occur through different types of relationships in a social network. Each of them plays a different role at different stages of a diffusion process. A simulation model incorporating multiple effects in a multiplex network is developed to provide a theoretical study. We simulate the experience effect and the externality effect in a context of rural diffusion. It generates the widely acknowledged pattens of diffusion in various scenarios. The experiments conducted using the model show that peer effects as a whole can be substantially misestimated if the underlying mechanisms are ignored.

Keywords: Peer Effects, Diffusion of Innovations, Multiplex Social Networks

JEL Classification: A14, P46, D71, O13, Q10

Suggested Citation

Xiong, Hang and Payne, Diane and Kinsella, Stephen, Peer Effects in the Diffusion of Innovations: Theory and Simulation (March 2, 2015). Available at SSRN: or

Hang Xiong (Contact Author)

ETH Zurich ( email )

Sonneggstrasse 33
Zurich, 8092


King's College London ( email )

London, England WC2R 2LS
United Kingdom

Diane Payne

UCD School of Sociology, Dynamics Lab, ( email )

UCD Geary Institute of Public Policy
University College Dublin, Belfield Campus,
Dublin, Dublin 4
++35317168561 (Phone)


Stephen Kinsella

University of Limerick ( email )

+35361233611 (Phone)
+35361330316 (Fax)


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