Diffusion Games

Abstract

Behaviors and information often spread via person-to-person diffusion. This paper highlights how diffusion processes can facilitate coordination. I study contagion in a discrete network with Bayesian players. In addition to characterizing the extent and rate of adoption, we uncover a new effect: when large cascades are possible in equilibrium, exposure conveys information about a player's network position. This effect underscores a novel tradeoff in the design of marketing campaigns, suggesting conditions under which word-of-mouth is relatively more effective. A generalization of the model to multi-type networks suggests a new approach to targeted seeding.

Keywords: Networks, Diffusion, Configuration Model, Branching Process, Mean-Field, Viral