The Value of Network Information
AbstractThe business model of companies such as Facebook, MySpace, and Twitter, relies on mon- etizing the information on the interactions and in uences of their users. How valuable is such information, and is its use bene cial or detrimental for consumer welfare? We study these questions in a model where a monopoly sells a network good and may price discriminate using network information: information on consumers in uences and/or on consumers susceptibili- ties to influence. Our framework incorporates a rich set of market products, including goods characterized by global and local network effects. We derive results on the value of network information and determine under which conditions, relative to uniform price, consumer surplus increases. We demonstrate the applicability of our framework using survey data on various types of relationships.
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Bibliographic InfoPaper provided by Brown University, Department of Economics in its series Working Papers with number 2013-13.
Date of creation: 2013
Date of revision:
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Postal: Department of Economics, Brown University, Providence, RI 02912
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-12-20 (All new papers)
- NEP-COM-2013-12-20 (Industrial Competition)
- NEP-ICT-2013-12-20 (Information & Communication Technologies)
- NEP-NET-2013-12-20 (Network Economics)
- NEP-SOC-2013-12-20 (Social Norms & Social Capital)
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