49 Pages Posted: 4 Aug 2018 Last revised: 20 Oct 2018
Date Written: October 17, 2018
We analyze the design of a mechanism to extract ordinal information disseminated in a social network. We show that friend-based ranking — the report by agents on the characteristics of their neighbors — is a necessary condition for ex post incentive-compatible and efficient mechanism design. We characterize the windmill network as the sparsest social network for which the planner can construct a complete ranking. When complete rankings cannot be achieved, ex post incentive-compatible and efficient mechanisms arise when social networks are bipartite or composed of triangles. We illustrate these findings using real social networks in India and Indonesia.
Keywords: social networks, mechanism design, peer ranking, targeting
JEL Classification: D85, D82, O12, D71
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