Diffusion Games
American Economic Review · 2020 · Volume 110 · Issue 1
Abstract
Behaviors and information often spread via person-to-person diffusion. This paper highlights how diffusion processes can facilitate coordination. I study contagion in a discrete network with Bayesian players. In addition to characterizing the extent and rate of adoption, we uncover a new effect: when large cascades are possible in equilibrium, exposure conveys information about a player's network position. This effect underscores a novel trade-off in the design of marketing campaigns, suggesting conditions under which word-of-mouth is relatively more effective. A generalization of the model to multi-type networks suggests a new approach to targeted seeding.
Keywords
Search, Learning, Information and Knowledge, Communication, Belief, Unawareness, Network Formation and Analysis: Theory, Marketing, Advertising, Economic Sociology, Economic Anthropology, Language, Social and Economic Stratification
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