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Internet and Network Economics

Volume 7695 of the series Lecture Notes in Computer Science pp 532-538

On Fixed-Price Marketing for Goods with Positive Network Externalities

  • Vahab S. MirrokniAffiliated withGoogle Research
  • , Sebastien RochAffiliated withDepartment of Mathematics, UW–Madison
  • , Mukund SundararajanAffiliated withGoogle Research

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Abstract

In this paper we discuss marketing strategies for goods that have positive network externalities, i.e., when a buyer’s value for an item is positively influenced by others owning the item. We investigate revenue-optimal strategies of a specific form where the seller gives the item for free to a set of users, and then sets a fixed price for the rest. We present a \(1\over 2\)-approximation for this problem under assumptions about the form of the externality. To do so, we apply ideas from the influence maximization literature [13] and also use a recent result on non-negative submodular maximization as a black-box [3,7].