Events at CERGE-EI

Prof. Eyal Winter

Authors: Eyal Winter and Vladyslav Nora

Abstract: We study a binary action network game 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 wishes to maximize the sum of transfers while inducing everyone to act in a unique equilibrium. The model represents a variety of social network environments with the primary applications being network goods and social media. We characterize optimal transfers, showing that relative degree centrality matters: agents who are more popular than their friends receive preferential treatment from the principal. We use this observation to show that under some mild conditions complete core-periphery networks are the most favorable for the principal to induce action. We further compare networks in terms of the principal’s revenue and find that more unequal networks where links tend to have a small-degree agent as at least one of the endpoints deliver higher revenue.

JEL Classification: C72, D82
Keywords: social networks, mechanism design, unique implementation, strategic complementarities, split graphs

Full Text: Exploiting Social Influence in Networks