Document Type

Discussion Paper

Publication Date

5-1-2019

CFDP Number

2178R

CFDP Revision Date

10-1-2021

CFDP Pages

43

Journal of Economic Literature (JEL) Code(s)

D85, D13, G21, L14, O12, O16, Z13

Abstract

A critical element of word of mouth (WOM) or buzz marketing is to identify seeds, often central actors with high degree in the social network. Seed identification typically requires data on the full network structure, which is often unavailable. We therefore examine the impact of WOM seeding strategies motivated by the friendship paradox to obtain more central nodes without knowing network structure on adoption. Higher-degree nodes may be less effective as seeds if these nodes communicate less with neighbors or are less persuasive when they communicate; therefore whether friendship paradox motivated seeding strategies increase or reduce WOM and adoption remains an empirical question. We develop and estimate a model of WOM and adoption using data on microfinance adoption across 43 villages in India for which we have data on social networks. Counterfactuals show that the proposed seeding strategies are about 15-24% more effective in increasing adoption relative to random seeding. These strategies are also about 5-13% more effective than the firm’s leader seeding strategy, and are relatively more effective when we have fewer seeds.

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