Competing for Attention in Social Communication Markets
37 Pages Posted: 10 Sep 2013 Last revised: 26 Feb 2015
Date Written: January 20, 2015
We investigate the incentives for social communication in the new social media technologies. Three features of online social communication are represented in the model. First, new social media platforms allow for increased connectivity: i.e., they enable sending messages to many more receivers, for the same fixed cost, when compared to traditional word-of-mouth. Second, users contribute content because they derive status/image based utility from being listened to by their peers. Finally, we capture the role of social differentiation, or how social distance between people affects their preferences for messages. In the model agents endogenously decide whether or not to be a sender of information and then compete for the attention of receivers. An important point of the paper is that social communication incentives diminish even as the reach or the span of communication increases. As the span of communication increases, competition between senders for receiver attention becomes more intense resulting in senders competing with greater equilibrium messaging effort. This in turn leads to lower equilibrium payoffs and the entry of fewer senders. This result provides a strategic rationale for the so-called "participation inequality" phenomenon which is a characteristic of many social media platforms. We also show that social differentiation may enhance or deter sender entry depending upon whether or not it can be endogenously influenced by senders. Finally, we examine how the underlying network structure (in terms of its density and its degree distribution) affects communication and uncover a non-monotonic pattern in that increased connectivity first increases and then reduces the entry of senders.
Keywords: Social Networks, Social Communication, Participation Inequality
JEL Classification: M31, C72, D44
Suggested Citation: Suggested Citation