Bias reduction of peer influence effects with latent coordinates and community membership

Abstract: The importance of peer influence on consumer actions plays a vital role in marketing efforts. However, peer influence effects are often confounded with latent homophily, which are unobserved commonalities that drive friendship. Understanding causality has become one of the pressing issues of current research. We present an approach to explicitly account for various causal influences. We implement a simulation framework to show the effectiveness of two latent homophily proxies, latent coordinates and community membership, in improving peer influence effect estimates on game downloads in a Japanese social network website. We demonstrate that latent homophily proxies have no significant improvement in peer influence effect bias in the available website data.