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date: 04 December 2020

Abstract and Keywords

This chapter analyzes the optimal use of social networks by firms that wish to diffuse new products, rely on word-of-mouth communication for advertising, or exploit consumption externalities among consumers. It focuses on two topics: the targeting of individuals to diffuse information or opinions in a social network, and the pricing at different nodes of the social network when agents experience consumption externalities. In both cases, firms take the network of social interaction as given and consider how to optimally leverage social effects to introduce new products or maximize profits .

Keywords: targeting, pricing, new product diffusion, consumption externalities, word-of-mouth communication

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