Social Networks and the Choices People Make

Abstract

Social marketing is becoming increasingly important in contemporary business. Central to social marketing is quantifying how consumers choose between alternatives and how they influence each other. This work considers a new but simple multinomial choice model for multiple agents connected in a recommendation network based on the explicit modeling of choice adoption behavior. Efficiently computable closed-form solutions, absent from analyses of threshold/cascade models, are obtained together with insights on how the network affects aggregate decision making. A stylized "brand ambassador" selection problem is posed to model targeting in social marketing. Therein, it is shown that a greedy selection strategy leads to solutions achieving at least $1-1/e$ of the optimal value. In an extended example of imposing exogenous controls, a pricing problem is considered wherein it is shown that the single player profit optimization problem is concave, implying the existence of pure strategy equilibria for the associated pricing game.