Get Your Guns: The Negative Network Effect

10334546773_b40a76a50f_z by Matthew Nagler, Associate Professor, Department of Economics and Business, Colin Powell School

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.”

A network effect exists when an individual’s demand for a product increases with the number of people who currently use the product. Social networks, for example, are successful because so many people are on them. As more people join, the desire of others to be on that same platform increases. Network effects can cause a “bandwagon” to occur—the more people join, the more people want to join. They can also cause the reverse to happen: When some people reject a product for which use by others is critical, others find the product less valuable and they too may reject it. Because of bandwagons, demand for a network good can often be prone to tipping points, at which a critical moment is suddenly reached where the product becomes literally irresistible (or else—just as suddenly—eminently disposable).

A lot has been written about network effects by economists and other social scientists, but most of the writing is about what I refer to as “positive network effects”: situations where a person’s adopting a product increases the perceived benefit to others of using the product. In my article, I discovered the “evil twin” of this phenomenon, in which a person’s adopting a product increases the perceived cost or risk of not using the product: a negative network effect. I identified several examples in my article, but perhaps the most archetypal is SUVs. In “The Strategic Significance of Negative Externalities,” published in the journal Managerial and Decision Economics, I used data to estimate the negative network effect in the SUV market. That is, I measured the rate at which the increased uptake of SUVs caused other people to feel they needed one, too—in this case the desire is related directly to the perceived risk of colliding with someone else’s SUV.

Just like a positive network effect, a negative network effect can eventually result in a bandwagon. And this is exactly what is now being observed in Oregon: the more people have guns, the more other people perceive they are at increased risk if they don’t have a gun. Their reaction is not necessarily driven by actual numbers of people owning guns. Just the mere perception of the ubiquity of guns, fostered by how often shocking stories about gun violence appear in the news, can create the negative network effect. True or not, it was the perception of the Oregonians interviewed in the New York Times article that they would be safer, given how many guns they believe are out there and their increased perception of risk, if they themselves got a gun.

My research on this phenomenon suggests a clear role of public policy: when a bandwagon effect is imminent, we risk reaching a tipping point in which rapid uptake of the bandwagon product—in this case, guns—could occur. What government can do is apply a “nudge.” If it can increase the disincentive to own a gun, interest in gun acquisition might be suppressed just enough to prevent the tipping point from being reached. We might even tip toward a safer, alternate reality in which a lot fewer people have guns—and in which those who do own them hold them for reasons other than the fear of other gun owners.

Dr. Matthew G. Nagler is an Associate Professor in the Department of Economics and Business at the City College of New York. He also holds an affiliate appointment with the Graduate Center at the City University of New York. He has held positions as an antitrust consultant, a marketing professional, and a staff economist at the Federal Communications Commission. Dr. Nagler is the author of numerous refereed journal articles relating to applied microeconomics, industrial organization, behavioral economics, and social economics. He received his Bachelors Degree in Economics from Cornell University and his Ph.D. in Economics from the University of California at Berkeley.