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Network Multipliers: The Optimality of Targeting Neighbors

Author

Listed:
  • Galeotti Andrea

    (University of Essex)

  • Goyal Sanjeev

    (University of Cambridge)

Abstract

A firm wishes to inform a community of individuals about its product. Information travels within the community because of the social interactions between individuals. We establish that social interactions appear in a firm's payoff as a network multiplier, which is increasing both in the mean and in the variance of the distribution of connections. We then show that the degree distribution of a neighbor first order dominates the degree distribution of a node; so a firm must pick the neighbor of a node rather than a node itself as the target of communication. The advantages of employing an indirect communication strategy are greater in more dispersed networks.

Suggested Citation

  • Galeotti Andrea & Goyal Sanjeev, 2012. "Network Multipliers: The Optimality of Targeting Neighbors," Review of Network Economics, De Gruyter, vol. 11(3), pages 1-11, September.
    • Handle: RePEc:bpj:rneart:v:11:y:2012:i:3:n:4
    DOI: 10.1515/1446-9022.1415
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    References listed on IDEAS

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    1. Vega-Redondo,Fernando, 2007. "Complex Social Networks," Cambridge Books, Cambridge University Press, number 9780521857406.
    2. Andrea Galeotti & Sanjeev Goyal, 2009. "Influencing the influencers: a theory of strategic diffusion," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 509-532, September.
    3. Vega-Redondo,Fernando, 2007. "Complex Social Networks," Cambridge Books, Cambridge University Press, number 9780521674096.
    4. Andrea Galeotti & Sanjeev Goyal & Matthew O. Jackson & Fernando Vega-Redondo & Leeat Yariv, 2010. "Network Games," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(1), pages 218-244.
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    Cited by:

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    3. James D. Campbell, 2015. "Localized price promotions as a quality signal in a publicly observable network," Quantitative Marketing and Economics (QME), Springer, vol. 13(1), pages 27-57, March.

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