Popularity and Performance: A Large-Scale Study

TL;DR

This study investigates how popularity and perceived quality jointly influence the growth of options' popularity on a social investment platform, revealing an interaction where popularity amplifies the effect of quality.

Contribution

It introduces a model combining popularity and quality effects and provides large-scale empirical evidence supporting the interaction between these factors.

Findings

Popularity amplifies the effect of perceived quality.

More popular options tend to increase in popularity faster with higher quality.

Empirical data from eToro supports the model's predictions.

Abstract

Social scientists have long sought to understand why certain people, items, or options become more popular than others. One seemingly intuitive theory is that inherent value drives popularity. An alternative theory claims that popularity is driven by the rich-get-richer effect of cumulative advantage---certain options become more popular, not because they are higher quality, but because they are already relatively popular. Realistically, it seems likely that popularity is driven by neither one of these forces alone but rather both together. Recently, researchers have begun using large-scale online experiments to study the effect of cumulative advantage in realistic scenarios, but there have been no large-scale studies of the combination of these two effects. We are interested in studying a case where decision-makers observe explicit signals of both the popularity and the quality of various options. We derive a model for change in popularity as a function of past popularity and past perceived quality. Our model implies that we should expect an interaction between these two forces---popularity should amplify the effect of quality, so that the more popular an option is, the faster we expect it to increase in popularity with better perceived quality. We use a data set from eToro.com, an online social investment platform, to support this hypothesis.