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:|
|Publication status:||forthcoming, Review of Network Economics|
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- Simon P. Anderson & André de Palma, 2006.
Virginia Economics Online Papers
364, University of Virginia, Department of Economics.
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851, Boston College Department of Economics, revised 18 Oct 2014.
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