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Managing Consumer Referrals in a Chain Network

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Author Info

  • Maria Arbatskaya

    (Emory University)

  • Hideo Konishi

    ()
    (Boston College)

Abstract

We consider the optimal pricing and referral strategy of a monopoly that uses a simple consumer communication network (a chain) to spread product information. The first-best policy with fully discriminatory position-based referral fees involves standard monopoly pricing and referral fees that provide consumers with strictly positive referral incentives. Effective price discrimination among consumers based on their positions in the chain occurs in both the first-best solution and the second-best solution (with a common referral fee).

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Bibliographic Info

Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 850.

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Date of creation: 10 Jan 2014
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Handle: RePEc:boc:bocoec:850

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Related research

Keywords: communication network; consumer referral policy; referral fee; price discrimination;

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  1. Simon P. Anderson & André de Palma, 2009. "Information congestion," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 688-709.
  2. Jeong-Yoo Kim & Tackseung Jun, 2004. "A theory of consumer referral," Econometric Society 2004 Far Eastern Meetings 488, Econometric Society.
  3. Maria Arbatskaya & Hideo Konishi, 2013. "Consumer Referrals," Boston College Working Papers in Economics 851, Boston College Department of Economics.
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