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Targeted information release in social networks

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  • Junjie Zhou

    ()
    (School of International Business Administration, Shanghai University of Finance and Economics)

  • Ying-Ju Chen

    ()
    (University of California at Berkeley)

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    Abstract

    As a common practice, various firms initially make information and access to their products/services scarce within a social network; identifying influential players that facilitate information dissemination emerges as a pivotal step for their success. In this paper, we tackle this problem using a stylized model that features payoff externalities and local network effects, and the network designer is allowed to release information to only a subset of players (leaders); these targeted players make their contributions first and the rest followers move subsequently after observing the leaders' decisions. In the presence of incomplete information, the signaling incentive drives the optimal selection of leaders and can lead to a first-order materialistic effect on the equilibrium outcomes. We propose a novel index for the key leader selection (i.e., a single player to provide information to) that can be substantially different from the key player index in Ballester (2006)and the key leader index with complete information proposed in Zhou and Chen (2013). We also show that in undirected graphs, the optimal leader group identified in Zhou and Chen (2013) is exactly the optimal follower group when signaling is present. The pecking order in complete graphs suggests that the leader should be selected by the ascending order of intrinsic valuations. We also examine the out-tree hierarchical structure that describes a typical economic organization. The key leader turns out to be the one that stays in the middle, and it is not necessarily exactly the central player in the network.

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    Bibliographic Info

    Paper provided by NET Institute in its series Working Papers with number 13-04.

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    Length: 32 pages
    Date of creation: Sep 2013
    Date of revision:
    Handle: RePEc:net:wpaper:1304

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    Related research

    Keywords: social network; signaling; information management; targeted advertising; game theory;

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    1. Bramoulle, Yann & Kranton, Rachel, 2007. "Public goods in networks," Journal of Economic Theory, Elsevier, vol. 135(1), pages 478-494, July.
    2. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
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    8. Gabrielle Demange, 2004. "On group stability in hierarchies and networks," Post-Print halshs-00581662, HAL.
    9. Jeffrey Rohlfs, 1974. "A Theory of Interdependent Demand for a Communications Service," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 16-37, Spring.
    10. Bala, Venkatesh & Goyal, Sanjeev, 1998. "Learning from Neighbours," Review of Economic Studies, Wiley Blackwell, vol. 65(3), pages 595-621, July.
    11. Ballester, Coralio & Calvó-Armengol, Antoni, 2010. "Interactions with hidden complementarities," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 397-406, November.
    12. Coulter, Robin A & Price, Linda L & Feick, Lawrence, 2003. " Rethinking the Origins of Involvement and Brand Commitment: Insights from Postsocialist Central Europe," Journal of Consumer Research, University of Chicago Press, vol. 30(2), pages 151-69, September.
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