We study the practice of influencer marketing in oligopoly markets and its effect on market efficiency. In our model, each consumer is influenced by choices of a subset of other consumers. Firms gather information on consumers' influence and price discriminate using this information. In equilibrium, firms charge premia/subsidize below-/above-average-influential consumers; the premia/discounts depend on the strength of network effects and on how much information firms have on consumers' influence. Influencer marketing leads to inefficient consumer-product matches. Firms' investments in information are strategic complements, leading to a race for information acquisition that erodes welfare and firms' profits but increases consumer surplus.
Fainmesser, Itay P., and Andrea Galeotti.
"Pricing Network Effects: Competition."
American Economic Journal: Microeconomics,
Consumer Economics: Theory
Firm Behavior: Theory
Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Network Formation and Analysis: Theory
Oligopoly and Other Imperfect Markets