Social Network-Aware Market Entry Mechanisms: Incentivizing Competitor Invitations for Market Growth

Zhao (2021) identifies a fundamental challenge: participants often won’t invite competitors, stalling market growth. Existing solutions focus on simple referral incentives, but typically ignore both the game-theoretic structure of social networks and the nuanced conflicts of interest within them. Inspired by recent advances in network-driven behavioral modeling (Lu et al., 2025), this project proposes network-aware entry mechanisms that dynamically adjust incentives based on network position, competitive relationships, and the potential welfare/revenue impact of adding particular agents. For example, one could design a market entry game where inviting a direct competitor yields a bonus only if market efficiency or revenue is forecasted to increase for the inviter as well as the market owner—a "co-opetition" incentive. Simulation and experimental validation could reveal new principles for leveraging social structures in real-world platforms, from peer-to-peer lending (Huang, 2022) to gig marketplaces.

References:

1. Mechanism Design Powered by Social Interactions. Dengji Zhao (2021). Adaptive Agents and Multi-Agent Systems.
2. Selling Mechanism Design for Peer-to-Peer Lending and Related Markets: The Multi-Unit Uniform-Price Open Auction Versus Fixed Price. Guofang Huang (2022). Journal of Marketing Research.
3. Towards Realistic Virtual Power Plant Operation: Behavioral Uncertainty Modeling and Robust Dispatch Through Prospect Theory and Social Network-Driven Scenario Design. Yi Lu, Ziteng Liu, Shanna Luo, Jianli Zhao, Changbin Hu, Kun Shi (2025). Sustainability.