International College of Economics and Finance

Research seminar by Roman Chuhay (HSE, ICEF): «Marketing via Friends: Strategic Diffusion of Information in Social Networks with Homophily»

Roman Chuhay
Roman Chuhay
Thursday, October 28 ICEF held the Research seminar.
Venue: Pokrovski Bulvar, 11, Room Zh-822
Speaker: Roman Chuhay (HSE, ICEF)
Theme: «Marketing via Friends: Strategic Diffusion of Information in Social Networks with Homophily» ( pdf version)

 

 

Abstract: The paper studies the impact of homophily on the optimal strategies of  a monopolist, whose marketing campaign of new product relies on a word  of mouth communication. Homophily is a tendency of people to interact  more with those who are similar to them. In the model there are two  types of consumers embedded into a social network, which differ in  friendship preferences and desirable design of product. Consumers can  learn about the product directly from an advertisement or from their neighbors. The monopolist chooses the product design and price to  influence a pattern of communication among consumers. We find a number  of results: for low levels of homophily the product attractive to both types of consumers is preferred to specialized products; the  price elasticity is increasing in homophily; an increase in the homophily benefits both the monopolist and consumers; and the product attractive to both types may be optimal even if the monopolist obtains profits only from sales to one type of consumers.


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