Contagion of network products in small-world networks

Date
2019-05-20
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Source Title
Journal of Economic Interaction and Coordination
Print ISSN
1860-711X
Electronic ISSN
1860-7128
Publisher
Springer
Volume
14
Issue
4
Pages
789 - 809
Language
English
Type
Article
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Abstract

We formulate a model in which agents embedded in an exogenous social network decide whether to adopt a new network product or not. In the theoretical part of the paper, we characterize the stochastically stable equilibria for complete networks and cycles. For an arbitrary network structure, we develop a novel graph decomposition method to characterize the set of recurrent communication states, which is a superset of stochastically stable equilibria of the adoption game presented in our model. In the simulation part, we study the contagion process of a network product in small-world networks that systematically represent social networks. We simulate a generalization of the Morris (Rev Econ Stud 67(1):57–78, 2000) Contagion model that can explain the chasm between early adopters and early majority. Our numerical analysis shows that the failure of a new network product is less likely in a highly cliquish network. In addition, the contagion process reaches to steady state faster in random networks than in highly cliquish networks. It turns out that marketers should work with mixed marketing strategies, which will result in a full contagion of a network product and faster contagion rates with a higher probability.

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Keywords
Social network, Contagion, Simulation, Cliquish network, Random network, Small-world network
Citation
Published Version (Please cite this version)