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Referral Infomediaries

Author

Listed:
  • 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)

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.

Suggested Citation

  • Yuxin Chen & Ganesh Iyer & V. Padmanabhan, 2002. "Referral Infomediaries," Marketing Science, INFORMS, vol. 21(4), pages 412-434, May.
  • Handle: RePEc:inm:ormksc:v:21:y:2002:i:4:p:412-434
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    File URL: http://dx.doi.org/10.1287/mksc.21.4.412.135
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    References listed on IDEAS

    as
    1. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-659, September.
    2. Erik Brynjolfsson & Michael D. Smith, 2000. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Management Science, INFORMS, vol. 46(4), pages 563-585, April.
    3. Narasimhan, Chakravarthi, 1988. "Competitive Promotional Strategies," The Journal of Business, University of Chicago Press, vol. 61(4), pages 427-449, October.
    4. Lal, Rajiv & Villas-Boas, J Miguel, 1996. "Exclusive Dealing and Price Promotions," The Journal of Business, University of Chicago Press, vol. 69(2), pages 159-172, April.
    5. Fiona Scott Morton & Florian Zettelmeyer & Jorge Silva-Risso, 2001. "Internet Car Retailing," NBER Chapters,in: E-commerce, pages 501-519 National Bureau of Economic Research, Inc.
    6. Morton, Fiona Scott & Zettelmeyer, Florian & Silva-Risso, Jorge, 2001. "Internet Car Retailing," Journal of Industrial Economics, Wiley Blackwell, vol. 49(4), pages 501-519, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. 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.
    2. 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, University Library of Munich, Germany.
    3. repec:eee:jouret:v:87:y:2011:i:4:p:563-578 is not listed on IDEAS
    4. 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.
    5. 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.
    6. Reuber, A. Rebecca & Fischer, Eileen, 2011. "International entrepreneurship in internet-enabled markets," Journal of Business Venturing, Elsevier, vol. 26(6), pages 660-679.
    7. 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.
    8. David Soberman, 2005. "Questioning Conventional Wisdom About Competition in Differentiated Markets," Quantitative Marketing and Economics (QME), Springer, vol. 3(1), pages 41-70, January.
    9. Yuangao Chen & Shuiqing Yang & Zhoujing Wang, 2016. "Service cooperation and marketing strategies of infomediary and online retailer with eWOM effect," Information Technology and Management, Springer, vol. 17(2), pages 109-118, June.
    10. repec:eee:jouret:v:91:y:2015:i:3:p:451-467 is not listed on IDEAS
    11. Bing Jing & Z. Zhang, 2011. "Product line competition and price promotions," Quantitative Marketing and Economics (QME), Springer, vol. 9(3), pages 275-299, September.
    12. 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, March.
    13. repec:kap:qmktec:v:16:y:2018:i:2:d:10.1007_s11129-017-9196-7 is not listed on IDEAS
    14. 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.
    15. repec:eee:ijrema:v:31:y:2014:i:3:p:239-252 is not listed on IDEAS
    16. repec:eee:jouret:v:84:y:2008:i:1:p:59-75 is not listed on IDEAS
    17. Bing Jing, 2007. "Product differentiation under imperfect information: When does offering a lower quality pay?," Quantitative Marketing and Economics (QME), Springer, vol. 5(1), pages 35-61, March.
    18. Anindya Ghose & Tridas Mukhopadhyay & Uday Rajan, 2003. "Strategic Benefits of Referral Services," Review of Marketing Science Working Papers 2-2-1022, Berkeley Electronic Press.

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