Optimal Influence Strategies in Social Networks

This article suggests a modeling framework to investigate the optimal strategy followed by a monopolistic firm to manipulate the process of opinion formation in a social network. We consider a network which consists of the monopolist and a set of consumers who communicate to form their beliefs about the underlying product quality. When consumers' initial beliefs are uniform, we analytically and numerically show that the firm's optimal influence strategy always involves targeting the most influential consumer. We characterize the optimal amount of resources that should be allocated by the firm to this kind of manipulative activity. For the case of non-uniform initial beliefs, we rely on numerical methods to show that the monopolist might have an incentive to target the least influential consumer if the latter's initial opinion is low enough. The equilibrium valuation of the good and the firm's profitability are minimized when consumers' limiting influences on the consensus belief are equal, implying that the monopolist benefits from the presence of consumers with divergent strategic locations in the network