Influencing the Influencers

45 Pages Posted: 10 May 2019 Last revised: 14 Sep 2021

See all articles by Amy Pei

Amy Pei

Northeastern University

Dina Mayzlin

University of Southern California - Marshall School of Business

Date Written: September 10, 2021

Abstract

Social media influencers are category enthusiasts who often post product recommendations. Firms sometimes pay influencers to skew their product reviews in favor of the firm. We ask the following research questions. First, what is the optimal level of affiliation (if any) from the firm's perspective? Affiliation introduces positive bias to the influencer's review but also decreases the persuasiveness of the review. Secondly, since affiliated reviews are often biased in favor of the firm, what is the impact of affiliation on consumer welfare? We find that the affiliation decision depends on the cost of information acquisition, the consumer's prior and awareness, and the disclosure regime. When the consumer's prior belief is low, the firm needs to affiliate less closely or not at all in order to preserve the influencer's persuasiveness, the change in the consumer's belief following the influencer's review. In contrast, when the consumer's prior belief is high, the firm fully affiliates with the influencer to both maximize awareness and prevent a negative review. We also show that the firm's involvement can be Pareto-improving if the information acquisition cost is relatively high, and a partial disclosure rule may increase consumer welfare.

Keywords: social media influencer, word of mouth, online reviews, recommendations, Bayesian persuasion, game theory

JEL Classification: D83, M31, D82

Suggested Citation

Pei, Amy and Mayzlin, Dina, Influencing the Influencers (September 10, 2021). Available at SSRN: https://ssrn.com/abstract=3376904 or http://dx.doi.org/10.2139/ssrn.3376904

Amy Pei (Contact Author)

Northeastern University ( email )

360 Huntington Avenue
Boston, MA 02115-5000
United States

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

Dina Mayzlin

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States
213-740-3360 (Phone)

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