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The Value of Network Information

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Abstract

The business model of companies such as Facebook, MySpace, and Twitter, relies on mon- etizing the information on the interactions and in uences of their users. How valuable is such information, and is its use bene cial or detrimental for consumer welfare? We study these questions in a model where a monopoly sells a network good and may price discriminate using network information: information on consumers in uences and/or on consumers susceptibili- ties to influence. Our framework incorporates a rich set of market products, including goods characterized by global and local network effects. We derive results on the value of network information and determine under which conditions, relative to uniform price, consumer surplus increases. We demonstrate the applicability of our framework using survey data on various types of relationships.

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  • Itay P. Fainmesser & Andrea Galeotti, 2013. "The Value of Network Information," Working Papers 2013-13, Brown University, Department of Economics.
    • Handle: RePEc:bro:econwp:2013-13
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    Cited by:

    1. Mueller-Frank, Manuel & M. Pai, Mallesh, 2015. "Do Online Social Networks Increase Welfare?," IESE Research Papers D/1118, IESE Business School.
    2. Demange, Gabrielle, 2017. "Optimal targeting strategies in a network under complementarities," Games and Economic Behavior, Elsevier, vol. 105(C), pages 84-103.
    3. Sanjeev Goyal, 2015. "Networks in Economics: A Perspective on the Literature," Cambridge Working Papers in Economics 1548, Faculty of Economics, University of Cambridge.

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