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Influencing the influencers: a theory of strategic diffusion

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  • Andrea Galeotti
  • Sanjeev Goyal

Abstract

The growth of the Internet and assorted technologies has made it possible to collect and process detailed information on social networks. This article investigates how firms (and governments) can harness the power of social networks to promote their goals. We show that the optimal use of social networks leads to higher sales and greater profits. However, an increase in the level and dispersion of social interaction can increase or decrease the optimal influence strategy and profits of the player, depending on the content of the interaction. Optimal influence strategies will target individuals with low or high connections, depending on the content of interaction. Finally, the returns to investing in market research on social networks are greater in more unequal networks.

Suggested Citation

  • Andrea Galeotti & Sanjeev Goyal, 2009. "Influencing the influencers: a theory of strategic diffusion," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 509-532, September.
    • Handle: RePEc:bla:randje:v:40:y:2009:i:3:p:509-532
    DOI: 10.1111/j.1756-2171.2009.00075.x
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