Exploiting social influence in networks

Vladyslav Nora*, Eyal Winter

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We study binary action network games with strategic complementarities. An agent acts if the aggregate social influence of her friends exceeds a transfer levied on the agent by a principal. The principal seeks to maximize her revenue while inducing everyone to act in a unique equilibrium. We characterize optimal transfers showing that agents who are more popular than their friends receive preferential treatment. Our main result is that under mild conditions complete core-periphery networks deliver the highest revenue to the principal. Furthermore, we show that the revenue is higher in networks where links are allocated unequally across agents. Hence, the principal benefits from creating “influentials” by linking well-connected hubs to less popular periphery.

Original languageAmerican English
Pages (from-to)1-27
Number of pages27
JournalTheoretical Economics
Volume19
Issue number1
DOIs
StatePublished - Jan 2024

Bibliographical note

Publisher Copyright:
Copyright © 2024 The Authors.

Keywords

  • C72
  • D82
  • Social networks
  • split graphs
  • strategic complementarities
  • unique implementation

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