Get Your Guns: The Negative Network Effect

In the wake of the tragic mass shootings on a college campus in Roseburg, Oregon, President Obama and others have called for stricter gun control laws. Yet others, including many close to where the shootings took place, are saying increasingly that they feel they need to own a gun. (See, for example, the recent front page story in The New York Times, “Common Response After Killings in Oregon: ‘I Want to Have a Gun’.”) The dramatic tension between President Obama’s gun control advocacy and others’ calls for greater access to guns relates to a phenomenon I identified in a 2011 article in the Journal of Industrial Economics entitled, “Negative Externalities, Competition, and Consumer Choice.” I called the phenomenon “negative network effects.”

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The Emperor's New Vitamins

When something is a credence good, there are two ways the consumer might be protected against fraud. One is through the force of reputation. But because with credence goods people cannot figure out for sure if a product was a fraud even after they use it, they have nothing unequivocal to pass along via word-of-mouth, in chat rooms, or in online product reviews. Consumers who look to reputational sources for helpful information are less likely to find it. Brands that have perpetrated a fraud can get away with it for a long time before enough negative feedback accumulates to effectively bring them down.

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