Managing Consumer Referrals in a Chain Network
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).
|Date of creation:||10 Jan 2014|
|Date of revision:||01 Nov 2016|
|Publication status:||published, Review of Network Economics, 13, 69-94, 2014|
|Contact details of provider:|| Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA|
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- Jeong-Yoo Kim & Tackseung Jun, 2004.
"A theory of consumer referral,"
Econometric Society 2004 Far Eastern Meetings
488, Econometric Society.
- Simon P. Anderson & André de Palma, 2009.
RAND Journal of Economics,
RAND Corporation, vol. 40(4), pages 688-709.
- Maria Arbatskaya & Hideo Konishi, 2013.
Boston College Working Papers in Economics
851, Boston College Department of Economics, revised 01 Nov 2016.
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