Influencing the Influencers: a theory of strategic diffusion
Lead Research Organisation:
University of Cambridge
Department Name: Economics
Abstract
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Organisations
Publications
Galeotti A
(2009)
Influencing the influencers: a theory of strategic diffusion
in The RAND Journal of Economics
| Description | The aim of the project is to develop a general framework which studies influence maximisation in social networks. Specifically, we ask how do changes in the network of social relations - adding links to some players or redistributing links among consumers - affect equilibrium strategies and profits of players such as firms, under what circumstances is it optimal for players to target highly linked members and when is it profitable to target poorly linked consumers? What is the value of additional network information? We establish the following results. First, that social interactions are captured in a network multiplier which is a simple function of the mean and the variance of the distribution of connections of the network. The changes in social interactions thus have an effect on payoffs only via the changes in the mean and variance of the degree distribution. . Second, we show that the network multiplier is an increasing function of both the mean and the variance in the degree distribution. This implies in particular that denser and more dispersed degree distributions lead to higher action from the firm and also raise the profits of the firm. Third, building on the informal observation above, we show that the degree distribution of the neighbour first order stochastically dominates the degree distribution of a node at large. Hence, it is always better for a firm to pick the neighbour of a node than the node itself as the target of communication. Fourth, that the advantages of choosing a neighbour are increasing with the dispersion in the degree distribution and so a firm's profits actually increase with a mean preserving spread in the degree distribution. We note that the optimality of indirect communication and its increasing profitability under mean preserving spreads of the degree distribution are founded on the distinction between directed and undirected networks. Recall, that in our first two papers, which used a directed networks model, direct communication and indirect advertising are equally good, and mean preserving spreads actually lower expected profits. |
| Exploitation Route | not applicable The research done was of a theoretical nature; it has led to a number of follow up investigations by other researchers. |
| Sectors | Pharmaceuticals and Medical Biotechnology |