Screening Network Information: Optimal Network Interventions under Asymmetric Information

59 Pages Posted: 13 Jan 2025 Last revised: 11 Dec 2024

See all articles by Fanqi Shi

Fanqi Shi

School of Economics, Peking University

Yiqing Xing

Peking University - National School of Development

Litian Chen

Peking University - School of Economics

Date Written: November 25, 2024

Abstract

We propose a screening framework to analyze interventions in product markets with positive network externalities, where agents hold private information about their network degrees. We highlight the distinct roles of susceptibility and influence in screening and characterize optimal intervention policies for a profit-maximizing monopolist or a welfare-maximizing social planner. We derive further insights into agents’ allocations, the principal’s pricing patterns, and the gains of screening over uniform intervention. Specifically, we establish a connection between the pricing pattern and the hazard rate of agent degrees and identify both intensive and extensive gains of screening, with the intensive gain increasing in the dispersion of agent degrees. By addressing discriminatory intervention under asymmetric network information, our analysis provides a more precise measure of the value of network information while accommodating flexible objectives to guide practical interventions.

Keywords: Network effects, Network intervention, Consumption externalities, Private network information, Screening

Suggested Citation

Shi, Fanqi and Xing, Yiqing and Chen, Litian, Screening Network Information: Optimal Network Interventions under Asymmetric Information (November 25, 2024). Available at SSRN: https://ssrn.com/abstract=5033820 or http://dx.doi.org/10.2139/ssrn.5033820

Fanqi Shi

School of Economics, Peking University ( email )

No. 5 Yi Heyuan Road
Beijing, 100871
China
+8613520791730 (Phone)

Yiqing Xing (Contact Author)

Peking University - National School of Development ( email )

5 Yi He Yuan Road
Chengze Garden, 330
Beijing, 100871
China

HOME PAGE: http://https://sites.google.com/view/yiqingxing/

Litian Chen

Peking University - School of Economics ( email )

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