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Network marketing with bounded rationality and partial information

Author

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  • Kiet, Hoang Anh Tuan
  • Kim, Beom Jun

Abstract

Network marketing has been proposed and used as a way to spread the product information to consumers through social connections. We extend the previous game model of the network marketing on a small-world tree network and propose two games: In the first model with the bounded rationality, each consumer makes purchase decision stochastically, while in the second model, consumers get only partial information due to the finite length of social connections. Via extensive numerical simulations, we find that as the rationality is enhanced not only the consumer surplus but also the firm’s profit is increased. The implication of our results is also discussed.

Suggested Citation

  • Kiet, Hoang Anh Tuan & Kim, Beom Jun, 2008. "Network marketing with bounded rationality and partial information," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(19), pages 4896-4902.
    • Handle: RePEc:eee:phsmap:v:387:y:2008:i:19:p:4896-4902
    DOI: 10.1016/j.physa.2008.03.037
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    Cited by:

    1. Ashraf, Mohammad Ali & Alam, Mirza Mohammad Didarul & Alexa, Lidia, 2021. "Making decision with an alternative mind-set: Predicting entrepreneurial intention toward f-commerce in a cross-country context," Journal of Retailing and Consumer Services, Elsevier, vol. 60(C).
    2. MOGA Liliana Mihaela & DURAC Lucia, 2023. "Applications of Decomposed Theory of Planned Behaviour in Making Decision to Adopt a Career in Social Entrepreneurship," European Journal of Interdisciplinary Studies, Bucharest Economic Academy, issue 01, March.

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