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In-Store Referrals on the Internet

Author

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  • Cai, Gangshu (George)
  • Chen, Ying-Ju

Abstract

In the contemporary e-business, a retailer may display the links to the competing retailers directly (direct referral), or display the referral link provided by a third-party advertising agency (third-party referral), and these referrals may be either one-way or two-way. In this paper, we show that the referrals may align the retailers’ incentives and facilitate implicit collusion, and one-way referral may result in a mutually beneficial situation, thereby providing an economic rationale for these seemingly puzzling phenomena. Using third-party referrals may enhance the retailers’ collusion despite the potential disutility and revenue leakage, and referral services may be detrimental for the consumer welfare.

Suggested Citation

  • Cai, Gangshu (George) & Chen, Ying-Ju, 2011. "In-Store Referrals on the Internet," Journal of Retailing, Elsevier, vol. 87(4), pages 563-578.
    • Handle: RePEc:eee:jouret:v:87:y:2011:i:4:p:563-578
    DOI: 10.1016/j.jretai.2011.09.005
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    References listed on IDEAS

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    Cited by:

    1. Wan, Xing & Chen, Jing & Chen, Bintong, 2020. "Exploring service positioning in platform-based markets," International Journal of Production Economics, Elsevier, vol. 220(C).
    2. Feiyan Han & Herui Wang & Hongyu Lv & Bo Li, 2022. "Research on Manufacturers’ Referral Strategy Considering Store Brand Retailers and Traditional Retailers," Mathematics, MDPI, vol. 10(18), pages 1-23, September.
    3. Huang, Hongfu & Xing, Xinjie & He, Yong & Gu, Xiaoyu, 2020. "Combating greenwashers in emerging markets: A game-theoretical exploration of firms, customers and government regulations," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 140(C).
    4. Nejad, Mohammad G. & Amini, Mehdi & Babakus, Emin, 2015. "Success Factors in Product Seeding: The Role of Homophily," Journal of Retailing, Elsevier, vol. 91(1), pages 68-88.
    5. Fay, Scott & Xie, Jinhong & Feng, Cong, 2015. "The Effect of Probabilistic Selling on the Optimal Product Mix," Journal of Retailing, Elsevier, vol. 91(3), pages 451-467.
    6. Yang, Xiaodong & Cai, Gangshu (George) & Chen, Ying-Ju & Yang, Shu-Jung Sunny, 2017. "Competitive Retailer Strategies for New Market Research, Entry and Positioning Decisions," Journal of Retailing, Elsevier, vol. 93(2), pages 172-186.
    7. Jianqiang Zhang & Zhuping Liu & Raghunath Singh Rao, 2018. "Flirting with the enemy: online competitor referral and entry-deterrence," Quantitative Marketing and Economics (QME), Springer, vol. 16(2), pages 209-249, June.

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