The NPV of Bad News

We explore the effects of individualand network-level negative word-of-mouth on the firm’s profits using an agent-based model and specifically, an extended small world analysis. We include both permanent strong ties within the social network, and changing, often random, weak ties with other networks. The effect of negative word-of-mouth on the Net Present Value (NPV) of the firm was found to be substantial, even when the initial number of dissatisfied customers is relatively small. We show that the well-known phenomenon of the strength of weak ties has contradictory effects when taking into account negative word-ofmouth: Weak ties help to spread harmful information through networks, and can become a negative force for the product’s spread.