The Structure of Online Consumer Communication Networks

Abstract

In this paper we study the structure of the bilateral communication links within Online Consumer Communication Networks (OCCNs), such as virtual communities. Compared to the offline world, consumers in online networks are highly flexible to choose their communication partners and little is known about how this affects communication exchange structures. We analyze these structures by using a general approach from the game-theoretic literature of social and economic network formation where individuals trade off the cost of forming and maintaining links against the potential rewards of doing so, which results in a stable network structure. In our analysis, a combination of aspects common to OCCNs is incorporated that has not been investigated in this literature until now. First, the negative externality of communication specificity is included in the sense that the more direct connections an individual has to maintain with other individuals, the less she is able to specify her attention per link within her total time available. Therefore, the additive value per individual of her communications declines with an increasing number of links, and she also derives less additive value per individual from others with an increasing number of links. Second, a distinction is made between the social and informational value of communication, where informational communication value is assumed to be transferable via indirect links, whereas social communication value is not transferable. Analytical results are derived by using the concept of pairwise stability. A tendency towards fragmented pairwise stable structures - consisting of small, disjoint (star) components - is discovered, which can be attributed to the joint effect of the two aspects mentioned. We demonstrate that only some of the pairwise stable structures provide optimal welfare (total payoffs), and that the relative focus on informational versus social value of communication affects this welfare.

Keywords: Microeconomics, Consumers, Communication Specificity, Social vs. Informational Communication

JEL Classification: A14, C79