SOCIAL NETWORKS AND THE CHOICES PEOPLE MAKE

Abstract

Social marketing is becoming increasingly important in contemporary revenue management. Central to it is quantifying how consumers choose between alternatives and how they influence each other. This work considers a new but simple multinomial choice model for multiple agents connected in a recommendation network based on explicit modeling of choice adoption behavior. Efficiently computable closed-form solutions are obtained together with insights on how the network affects decisions. In particular, a new measure of the overall decision making power of individual agents, “decision share”, is proposed. The centrality of “decision share” is underscored by how it features prominently in then natural generalization from finite choice sets to measurable sets. This work explores social marketing through a stylized “brand ambassador selection problem”. The topic of herd behavior is also explored via a special case of the model, leading to a new result for the classic Polya urn model.