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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
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    References listed on IDEAS

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    1. 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.
    2. Andrea Galeotti & Sanjeev Goyal & Matthew O. Jackson & Fernando Vega-Redondo & Leeat Yariv, 2010. "Network Games," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 218-244.
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    Cited by:

    1. repec:kap:qmktec:v:13:y:2015:i:1:d:10.1007_s11129-014-9153-7 is not listed on IDEAS
    2. Eliaz, Kfir & Spiegler, Ran, 2016. "Incentive Compatible Advertising on a Social Network," CEPR Discussion Papers 11223, C.E.P.R. Discussion Papers.

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