Nonlinear Effects of Social Connections and Interactions on Individual Goal Attainment and Spending: Evidences from Online Gaming Markets

Although it seems intuitive for firms to leverage social connections and interactions to influence consumers’ goal attainment and spending, the authors present a caveat of such strategies. Using two large-scale data sets with more than 5 million people-day observations from online gaming markets, Studies 1 and 2 show consistently nonlinear effects. Although some social connections and interactions boost goal attainment and spending (positive linear term), after a certain point too many of them have a diminished marginal effect (negative squared term). The results are robust to a wide array of modeling techniques addressing self-selection, unobserved individual heterogeneity, and endogeneity. In addition, novices can benefit more from greater social connections and interactions, yet also suffer more from the diminishing effects. Regarding the underlying mechanism, the follow-up experiment Study 3 shows that consistent with the information processing theory, some social connections and interactions can provide information support for goal attainment, but too many of them can introduce an information overload problem and, thus, hamper goal attainment intention. Together, these findings refute a simple, linear view of the effects of social connections and interactions and provide pivotal theoretical and practical implications.

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