A Friend Like Me: Modeling Network Formation in a Location-Based Social Network
Journal of Management Information Systems, 33(4), 1008-1033
Posted: 25 Apr 2016 Last revised: 8 Jul 2017
Date Written: April 24, 2016
This paper studies the strategic network formation in a location-based social network. We build an empirical model of social link creation that incorporates individual characteristics and pairwise user similarities. Specifically, we define four user proximity measures from biography, geography, mobility, and short messages. To construct proximity from unstructured text information, we build topic models using Latent Dirichlet Allocation. Using Gowalla data with 385,306 users, 3 million locations, and 35 million check-in records, we empirically estimate the model to find evidence on the homophily effect on network formation. To cope with possible endogeneity issues, we use exogenous weather shocks as our instrumental variables and find the empirical results are robust: network formation decisions are significantly affected by our proximity measures. Our network formation model and the proposed user proximity measures have theoretical and managerial implications on the friend recommendation and the implementation of firms’ seeding strategies in location-based social networks.
Keywords: network formation, location-based service, social networks, user proximity, topic modeling, homophily
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