- Economics of Social Networks
- Public Economics
Job Market Paper: Getting the Right Spin: A Theory of Value of Social Networks
I examine a framework where a company can "seed" word-of-mouth advertising by providing some information about a product to agents of a social network. Such users can choose the information they prefer amongst their sources of information. I then seek to answer the two following questions: what is the best word-of-mouth campaign that the company can perform and second, what is the value of such a campaign? The optimal solution maximizes variance over the set of all sustainable Nash Equilibria. Such solution reproduces patterns of contagion that have been observed in empirical studies. The value of a network can be decomposed into three components: the value of the "seed", the value of the choices made by users given this campaign and finally, the social value of the network. Such a theory allows one to price companies that own social networks like Facebook. The theory suggests that advertising investments in users should be proportional to the discounted influence they have, where the influence of a user is measured as the number of users who choose to listen to him. An algorithm to compute the optimal solution in polynomial time is presented.
JEL Codes: L1, D83, D85.
Externalities, Social Value and Word of Mouth: Notions of Public Economics on Networks
I examine an environment where advertisers can "seed" word-of-mouth advertising by providing initial information about a product to specific users of a social network. Discussion over a social network generates spillover effects for firms when consumers can use the social network to inform each other about products. When a firm can exploit a social network's structure, it can increase its sales. However, when the network formation process is costly, firms free-ride on such costs at the expense of agents on the network. If agents can form coalitions, I show that they can recoup the value of this externality by charging a toll.
When users actively modify the information, generating word-of-mouth advertising about a product provides a "social value." This social value stems from the discussions that agents have about the product, without any intervention. Since this process occurs regardless of the firm's actions, the firm cannot capture such valuation. The opinion leaders, or highly regarded agents on the network, play a key role in the formation of this social value.
JEL Codes: L1, D83, D85.
UPDATED: University Funding Policies: Buildings or Citizens?
Governments tend to fund universities based on the number of registered students and lump sum transfers. Such policy induces universities to compete for recruiting students, diverting money away from funds devoted to teaching. I show this degradation of quality increases with the degree to which universities compete for the same students. I suggest a policy that achieves the social optimum for any given level of funding. This policy shows that a university's funding rules should not be solely based on its enrollment, but also on the enrollment in competing universities.
JEL Codes: H52, I23, I28.
- Predicting contagion
- A Network Foundation of Business Cycles
- Temptation, Self-control and Redistributive Public Pensions (with Jean-Denis Garon)
Copyright Pier-André Bouchard St-Amant 2005-2013.