Word of Mouth Advertising, Credibility and Learning in Networks

Social networks representing the pattern of social interactions who talks to or who observes whomplay a crucial role as a medium for the spread of information, ideas, diseases, products. Someone in the population may be struck with an infection or may adopt a new technology, and it can then either die out quickly or spread throughout the population, depending possibly on the location of the initial appearance, the structure of the network for instance, how dense it is. The dynamics of adoption -the extent to which individuals are influenced by their neighbours, the impact of “word-ofmouth" communicationalso plays a role in determining the speed of diffusion. Given the large range of contexts in which social learning is important, it is not surprising that researchers from various disciplines have studied processes of diffusion from a variety of perspectives.1 For instance, the classic study of [3] describes the impact of the social structure on the prescription of a new drug by doctors. [8], [18] are amongst several papers that focus on social learning and the adoption of new technologies in agriculture in developing countries. Of ∗We are very grateful to Sanjeev Goyal, Matt Jackson and especially Parikshit Ghosh for helpful comments on an earlier version of the paper. Chatterjee thanks the Human Capital Foundation (http://www.hcfoundation.ru/en/), and especially Andrey Vavilov, for financial support to the Penn State Department of Economics. 1See [15] for an account of recent research on diffusion.