Marketing resource allocation in duopolies over social networks

TL;DR

This paper models competitive marketing resource allocation in social networks using game theory, analyzing how marketers can optimize their budgets based on agent influence and network effects.

Contribution

It introduces a game-theoretical framework for duopolistic marketing in social networks and provides equilibrium analysis and practical insights for budget allocation strategies.

Findings

Smart budget allocation outperforms uniform strategies under certain conditions

Definitions of agent influence power and gain of targeting are introduced

Equilibrium analysis reveals optimal marketing strategies in social networks

Abstract

One of the key features of this paper is that the agents' opinion of a social network is assumed to be not only influenced by the other agents but also by two marketers in competition. One of our contributions is to propose a pragmatic game-theoretical formulation of the problem and to conduct the complete corresponding equilibrium analysis (existence, uniqueness, dynamic characterization, and determination). Our analysis provides practical insights to know how a marketer should exploit its knowledge about the social network to allocate its marketing or advertising budget among the agents (who are the consumers). By providing relevant definitions for the agent influence power (AIP) and the gain of targeting (GoT), the benefit of using a smart budget allocation policy instead of a uniform one is assessed and operating conditions under which it is potentially high are identified.