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Referral Infomediaries

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Author Info

  • Yuxin Chen

    ()
    (Stern School of Business, New York University, New York, New York 10012)

  • Ganesh Iyer

    ()
    (Haas School of Business, University of California, Berkeley, California 94720–1900)

  • V. Padmanabhan

    ()
    (Olin School of Business, Washington University, St. Louis, Missouri 63130–4899)

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    Abstract

    An interesting phenomenon has been the emergence of “infomediaries” in the form of Internet referral services in many markets. These services offer consumers the opportunity to get price quotes from enrolled brick-and-mortar retailers and direct consumer traffic to particular retailers who join them. This paper analyzes the effect of referral infomediaries on retail markets and examines the contractual arrangements that they should use in selling their services. We identify the conditions necessary for the infomediary to exist and explain how they would evolve with the growth of the Internet. The role of an infomediary as a price discrimination mechanism leads to lower online prices. Perhaps the most interesting result is that the referral infomediary can unravel (i.e., no retailer can get any net profit gain from joining) when its reach becomes too large. The analysis also shows why referral infomediaries would prefer to offer geographical exclusivity to joining retailers.

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    File URL: http://dx.doi.org/10.1287/mksc.21.4.412.135
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    Bibliographic Info

    Article provided by INFORMS in its journal Marketing Science.

    Volume (Year): 21 (2002)
    Issue (Month): 4 (May)
    Pages: 412-434

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    Handle: RePEc:inm:ormksc:v:21:y:2002:i:4:p:412-434

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    Related research

    Keywords: Referral Services; Infomediaries; Intermediaries; Internet; Price Discrimination; Retail Competition; Exclusive Contracts;

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    Cited by:
    1. Florian Zettelmeyer & Fiona Scott Morton & Jorge Silva-Risso, 2001. "Cowboys or Cowards: Why are Internet Car Prices Lower?," NBER Working Papers 8667, National Bureau of Economic Research, Inc.
    2. Bing Jing & Z. Zhang, 2011. "Product line competition and price promotions," Quantitative Marketing and Economics, Springer, vol. 9(3), pages 275-299, September.
    3. Anindya Ghose & Tridas Mukhopadhyay & Uday Rajan, 2003. "Strategic Benefits of Referral Services," Review of Marketing Science Working Papers 2-2-1022, Berkeley Electronic Press.
    4. Reuber, A. Rebecca & Fischer, Eileen, 2011. "International entrepreneurship in internet-enabled markets," Journal of Business Venturing, Elsevier, vol. 26(6), pages 660-679.
    5. Catherine Tucker & Juanjuan Zhang, 2008. "Decomposing the Congestion Effect and the Cross-Platform Effect in Two-Sided Networks: A Field Experiment," Working Papers 08-12, NET Institute, revised Oct 2008.
    6. Michael Arnold & Chenguang Li & Christine Saliba & Lan Zhang, 2011. "Asymmetric Market Shares, Advertising And Pricing: Equilibrium With An Information Gatekeeper," Journal of Industrial Economics, Wiley Blackwell, vol. 59(1), pages 63-84, 03.
    7. Bing Jing, 2007. "Product differentiation under imperfect information: When does offering a lower quality pay?," Quantitative Marketing and Economics, Springer, vol. 5(1), pages 35-61, March.
    8. Florian Zettelmeyer & Fiona Scott Morton & Jorge Silva-Risso, 2005. "How the Internet Lowers Prices: Evidence from Matched Survey and Auto Transaction Data," NBER Working Papers 11515, National Bureau of Economic Research, Inc.
    9. Arnold Michael A. & Pénard Thierry, 2007. "Bargaining and Fixed Price Offers: How Online Intermediaries are Changing New Car Transactions," Review of Network Economics, De Gruyter, vol. 6(2), pages 1-27, June.
    10. Lu Hsiao & Ying-Ju Chen, 2013. "The perils of selling online: Manufacturer competition, channel conflict, and consumer preferences," Marketing Letters, Springer, vol. 24(3), pages 277-292, September.
    11. Il-Horn Hann & Kai-Lung Hui & Sang-Yong Tom Lee & Ivan P.L. Png, 2005. "Sales and Promotions: A More General Model," Industrial Organization 0508014, EconWPA.
    12. David Soberman, 2005. "Questioning Conventional Wisdom About Competition in Differentiated Markets," Quantitative Marketing and Economics, Springer, vol. 3(1), pages 41-70, January.

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