Games of Social Influence

This paper considers a game played among players who seek to extract payoffs from a group of individuals subject to local interaction effects. We are interested in the relation between the network of social interaction and equilibrium actions and payoffs. We start with an analysis of two economic examples – strategic advertising in the presence of word of mouth advertising and social non-competitive marketing – to bring out the simple point that changing network connections can increase as well as decrease equilibrium actions and payoffs. This leads to an investigation of general conditions on payoffs under which equilibrium actions and payoffs increase/decrease with an increase in density of connections. We also develop conditions under which a greater dispersion in network connections leads unambiguously to positive and negative effects on actions as well as payoffs. JEL classification: