The Emergence of Opinion Leaders in Social Networks
50 Pages Posted: 9 Jul 2008
Date Written: July 5, 2008
Abstract
A major challenge in many word-of-mouth marketing campaigns is the cost-effective identification of opinion leaders, consumers who exert disproportionate influence on the purchase decisions of other consumers. However, empirical studies agree on few consumer characteristics that are strong predictors of opinion leadership. In the present research, we attempt to explain these null or weak findings through a game-theoretic perspective on opinion leader-follower relationships. Our model combines social network, word-of-mouth communication, consumer heterogeneity, and time preference in a setting in which each consumer makes once-in-a-lifetime choice between a new product and an outside option. We find that: (a) opinion leaders emerge in equilibrium whenever certain general conditions are met; (b) counter-intuitively, the most "patient" consumer with the highest time discount factor may become an opinion leader; and (c) equilibria in which opinion leaders are highly-connected and/or have low time discount factors may be neither efficient to consumers nor profit-maximizing to firms, even though they are likely to be focal outcomes.
Keywords: Word of mouth, opinion leaders, social networks, new-product diffusion models, game theory, consumer behavior
JEL Classification: C72, D83, M31
Suggested Citation: Suggested Citation
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