Social networks and the firm

Individuals often base their decisions on what they observe in their neighborhood or peer groups. It can be, on the one hand, that individuals gather information from their peers' experiences: for example, a consumer will be more likely to adopt a given product if many of that consumer's friends report a positive experience with the product. On the other hand, it can also be that the advantages or benefits attached to an individual's decision directly depend on the decision of others in the individual's social network. Social networks are thus central to the people's decisions, and information on social networks has high value to firms wishing to foster the adoption of their product and maximize profit. In light of these observations, it is natural to ask what the effect of information on social networks is on firms' competitive behavior and strategy.