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Welfare Maximization with Friends-of-Friends Network Externalities

Authors Sayan Bhattacharya, Wolfgang Dvorák, Monika Henzinger, Martin Starnberger

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Sayan Bhattacharya
Wolfgang Dvorák
Monika Henzinger
Martin Starnberger

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Sayan Bhattacharya, Wolfgang Dvorák, Monika Henzinger, and Martin Starnberger. Welfare Maximization with Friends-of-Friends Network Externalities. In 32nd International Symposium on Theoretical Aspects of Computer Science (STACS 2015). Leibniz International Proceedings in Informatics (LIPIcs), Volume 30, pp. 90-102, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2015)


Online social networks allow the collection of large amounts of data about the influence between users connected by a friendship-like relationship. When distributing items among agents forming a social network, this information allows us to exploit network externalities that each agent receives from his neighbors that get the same item. In this paper we consider Friends-of-Friends (2-hop) network externalities, i.e., externalities that not only depend on the neighbors that get the same item but also on neighbors of neighbors. For these externalities we study a setting where multiple different items are assigned to unit-demand agents. Specifically, we study the problem of welfare maximization under different types of externality functions. Let n be the number of agents and m be the number of items. Our contributions are the following: (1) We show that welfare maximization is APX-hard; we show that even for step functions with 2-hop (and also with 1-hop) externalities it is NP-hard to approximate social welfare better than (1-1/e). (2) On the positive side we present (i) an O(sqrt n)-approximation algorithm for general concave externality functions, (ii) an O(\log m)-approximation algorithm for linear externality functions, and (iii) an (1-1/e)\frac{1}{6}-approximation algorithm for 2-hop step function externalities. We also improve the result from [6] for 1-hop step function externalities by giving a (1-1/e)/2-approximation algorithm.
  • network externalities
  • welfare maximization
  • approximation algorithms


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