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The Structure of Online Consumer Communication Networks

  • Harmsen - van Hout, Marjolein J.W.


    (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))

  • Herings, P. Jean-Jacques


    (Department of Economics, School of Business and Economics, Maastricht University)

  • Dellaert, Benedict G.C.


    (Department of Business Economics / Marketing Section, Erasmus School of Economics, Erasmus University Rotterdam)

We analyze the structure of bilateral communication links among consumers in virtual communities by a game-theoretic model of network formation. First, link specificity is incorporated, meaning that the more direct links somebody has to maintain with others, the less she is able to specify her attention per link, so that the value of her links decreases. Second, a distinction is made between the social and informational value from communication, where informational value is transferable via indirect links, whereas social value is not. We characterize the set of pairwise stable structures in the case with only social value to indicate the separate impact of link specificity and demonstrate that it includes a wide range of non-standard architectures under large link specificity and particular combinations of fully connected components under low link specificity. In the case with both social and informational value, the joint effect of link specificity and value transferability is shown to reduce the pairwise stable set to particular fragmented architectures under large link specificity or rather to the complete network under small link specificity.

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Paper provided by E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN) in its series FCN Working Papers with number 3/2010.

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Length: 25 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:ris:fcnwpa:2010_003
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  1. Hans Haller & Sudipta Sarangi, 2003. "Nash Networks with Heterogeneous Agents," Discussion Papers of DIW Berlin 337, DIW Berlin, German Institute for Economic Research.
  2. Dellarocas, Chrysanthos, 2003. "The Digitization of Word-of-mouth: Promise and Challenges of Online Feedback Mechanisms," Working papers 4296-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  3. Venkatesh Bala & Sanjeev Goyal, 2000. "A Noncooperative Model of Network Formation," Econometrica, Econometric Society, vol. 68(5), pages 1181-1230, September.
  4. Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Chrysanthos Dellarocas, 2003. "The Digitization of Word of Mouth: Promise and Challenges of Online Feedback Mechanisms," Management Science, INFORMS, vol. 49(10), pages 1407-1424, October.
  6. Qin, Cheng-Zhong, 1996. "Endogenous Formation of Cooperation Structures," Journal of Economic Theory, Elsevier, vol. 69(1), pages 218-226, April.
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