Abstract for: A System Dynamics Model for Studying the Structure of Network Marketing Organizations

The importance of social structures in analyzing a diffusion of ideas and innovations is widely acknowledged. This paper presents the first step in the construction of a system dynamics model to study social diffusion phenomena using network marketing as the specific structure through which products and services are spread. Network marketing organizations are direct-selling channels that recruit new distributors and form a particular type of social network which is shaped through time and based on preferential attachment. The paper presents a way to generate the topology of such a network so as to have the basis for analyzing the diffusion of products and services through such channels; a variant is introduced to an existing model developed with systems dynamics for generating scale-free networks with preferential attachment. We found that the resulting model generates an adequate network topology for analyzing essential characteristics of the way network marketing organizations are formed. This structure is the base for exploring the diffusion of products through such a business model; exploration of these processes constitutes the next step for this project.