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

Forthcoming at Management Science

54 Pages Posted: 29 Mar 2016 Last revised: 28 Sep 2019

See all articles by Ruslan Momot

Ruslan Momot

University of Michigan, Stephen M. Ross School of Business

Elena Belavina

Cornell SC Johnson College of Business

Karan Girotra

Cornell Tech; Cornell SC Johnson College of Business

Date Written: October 27, 2018

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 (October 27, 2018). Forthcoming at Management Science, Available at SSRN: https://ssrn.com/abstract=2755638 or http://dx.doi.org/10.2139/ssrn.2755638

Ruslan Momot

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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

Elena Belavina (Contact Author)

Cornell SC Johnson College of Business ( email )

New York, NY 10044
United States

HOME PAGE: http://belavina.com

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

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