Targeting Informative Messages to a Network of Consumers

Abstract This paper considers duopolists targeting informative messages to consumers who share information locally with their network neighbors. A monopolist targets a parsimonious set of nodes that informs all consumers either directly or by word-of-mouth. A duopolist faces a tradeoff between this efficient targeting and possible preemption by a competitor's message. Under gentle price competition, duopolists saturate the network when messages are cheap, and target sets similar to the monopolist's when messages are costly. Under fierce price competition, duopolists' messages segment the network in an intermingled patchwork. Effects of network structure and the cost of messages on firm outcomes are discussed.