Pinar Yildirim, Marketing, The Wharton School; Yanhao Wei, USC Marshall; Christophe Van den Bulte, Marketing, The Wharton School; and Tong Lu, Tepper School of Business
Abstract: Many companies create and manage communities where consumers observe and exchange information about the effort expended by other consumers. Such communities are especially popular in the areas of fitness, education, dieting, and financial savings. We study how to optimally structure such consumer communities when the objective is to maximize the total or average amount of effort expended. Using mathematical modeling and assuming peer influence through conformity, we find that the optimal network design consists of a set of disconnected or very loosely connected sub-graphs, each of which is very densely connected within. Also, each sub-community in the optimal network consists of consumers selected such that their “standalone” propensity to exert effort negatively correlates with their propensity to conform and positively correlates with their propensity to influence others.