Persuasion in Networks: Can the Sender Do Better than Using Public Signals?

Abstract

Political and advertising campaigns increasingly exploit social networks to spread information and persuade people. This paper studies a persuasion model to examine whether such a strategy is better than simply sending public signals. Receivers in the model have heterogeneous priors and will pass on a signal if they are persuaded by it to take sender's preferred action. I show that a risk-neutral or risk-loving sender prefers to use public signals, unless the more sceptical receivers are sufficiently more connected in the network. This result still holds when the network exhibits homophily. When the sender is risk averse or has a threshold function as payoff function, I characterise conditions under which the sender prefers to exploit the network. An important factor identified by these conditions is whether the less sceptical receivers are sufficiently connected.