The Use and Value of Social Information in Selective Selling of Exclusive Products

54 Pages Posted: 29 Mar 2016 Last revised: 23 Jan 2019

See all articles by Ruslan Momot

Ruslan Momot

HEC Paris

Elena Belavina

Cornell SC Johnson College of Business

Karan Girotra

Cornell Tech; Cornell SC Johnson College of Business

Date Written: March 28, 2016

Abstract

We consider the use and value of social network information in selectively selling goods and services whose value derives from exclusive ownership among network connections or friends. Our model accommodates customers who are heterogeneous in their number of friends (degree) and their proclivity for social comparisons (conspicuity). Firms with information on either (or both) of these characteristics can use it to make the product selectively available and to personalize prices. We find that firms' preferred customers are low-degree and high-conspicuity, with the conspicuity threshold non-decreasing in degree. Interestingly, although both degree and conspicuity levels are relevant to curating the desired customer base, we find that firms don't need conspicuity information to do so; its absence can be substituted by incentivizing customers to self-select. There is no such recourse for the absence of degree information. As a result, degree information is typically more valuable than conspicuity information. Our analysis suggests that there are two canonical categories of social information– less valuable “consonant” information on characteristics where firm and customer preferences are aligned and more valuable “competing” information where preferences are misaligned. Customers can be incentivized to act in a way that their actions are a perfect substitute for consonant information making it less valuable.

Suggested Citation

Momot, Ruslan and Belavina, Elena and Girotra, Karan, The Use and Value of Social Information in Selective Selling of Exclusive Products (March 28, 2016). Chicago Booth Research Paper No. 16-08. Available at SSRN: https://ssrn.com/abstract=2755638 or http://dx.doi.org/10.2139/ssrn.2755638

Ruslan Momot

HEC Paris ( email )

1, rue de la Liberation
Jouy en Josas, 78351
France

HOME PAGE: http://www.ruslanmomot.info

Elena Belavina (Contact Author)

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

Karan Girotra

Cornell Tech ( email )

111 8th Avenue #302
New York, NY 10011
United States

HOME PAGE: http://www.girotra.com

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

HOME PAGE: http://www.girotra.com

Register to save articles to
your library

Register

Paper statistics

Downloads
444
Abstract Views
2,795
rank
64,372
PlumX Metrics