Exploiting social influence in networks

Vladyslav Nora, eyal winter

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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 languageEnglish
JournalTheoretical Economics
Publication statusAccepted/In press - 2023

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