Abstract
Recent advances in information technology and the boom in social media provide firms with easy access to the data of consumers’ preferences and their social interactions. To characterize marketing resource allocation in networks, this paper develops a game theoretical model that allows for each firm’s own utility, action strategies of other firms and the inner state (self-belief and opinions) of consumers. In this model, firms can sway consumers’ opinions by spending marketing resources among consumers under budget and cost constraints. Each firm competes for the collective preference of consumers in a social network to maximize its utility. We derived the equilibrium strategies theoretically in a connected network and a dispersed network from the constructed model. These reveal that firms should allocate more marketing resources to some of consumers depending on their initial opinions, self-belief and positions in a network. We found that some structures of consumer networks may have an innate dominance for one firm, which can be retained in equilibrium results. This means that network structure can be as a tool for firms to improve their utilities. Furthermore, the sensitivities of budget and cost to the equilibria were analyzed. These results can provide some reference for resource allocation strategies in marketing competition.
Highlights
The problem of resource allocation is a widely discussed topic that has aroused the interest of scholars in multiple fields, such as political campaigns, risk control and marketing management [1,2,3,4]
The equilibrium results of the above game in a connected network are presented in Proposition 1
The equilibrium results of the competition game in a connected network have been presented in Proposition 1
Summary
The problem of resource allocation is a widely discussed topic that has aroused the interest of scholars in multiple fields, such as political campaigns, risk control and marketing management [1,2,3,4]. Each firm competed for the collective preference of consumers in order to maximize its utility, and a game theoretical model was constructed to characterize such an allocation competition. This model allows for consumers’ initial opinions and is applicable to the marketing campaigns of new and old products. 1. A game theoretical model was developed to characterize the competitive allocation of marketing resources in networks, which integrates opinion evolution with heterogeneous beliefs into the allocation problem under budget and cost constraints.
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