In many industries, firms reward their customers for making referrals. We analyze the optimal policy mix of price, advertising intensity, and a referral fee for monopoly when buyers choose to what extent to refer other consumers to the firm. We find that the firm advertises less under referrals, but does not change its price from the monopoly level in an attempt to manage consumer referrals. We show that referral programs are Pareto-improving and that the firm underprovides referrals while supporting the socially optimum level of advertising. We extend the analysis to the case where consumer referrals can be targeted.
|Date of creation:||Oct 2013|
|Contact details of provider:|| Web page: http://economics.emory.edu/home/journals/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simon P. Anderson & André de Palma, 2006.
Virginia Economics Online Papers
364, University of Virginia, Department of Economics.
- Galeotti, Andrea & Moraga-González, José Luis, 2008. "Segmentation, advertising and prices," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1106-1119, September.
- Maria Arbatskaya & Hideo Konishi, 2014.
"Managing Consumer Referrals in a Chain Network,"
Boston College Working Papers in Economics
850, Boston College Department of Economics, revised 01 Nov 2016.
- Maria Arbatskaya & Hideo Konishi, 2013. "A Theory of Consumer Referral: Revisited," Emory Economics 1311, Department of Economics, Emory University (Atlanta).
- Arbatskaya, Maria & Konishi, Hideo, 2016.
International Journal of Industrial Organization,
Elsevier, vol. 48(C), pages 34-58.
- Maria Arbatskaya & Hideo Konishi, 2013. "Consumer Referrals," Boston College Working Papers in Economics 851, Boston College Department of Economics, revised 01 Nov 2016.
- Maria Arbatskaya & Hideo Konishi, 2013. "Consumer Referrals," Emory Economics 1310, Department of Economics, Emory University (Atlanta).
- Van Zandt, Timothy, 2001.
"Information Overload in a Network of Targeted Communication,"
CEPR Discussion Papers
2836, C.E.P.R. Discussion Papers.
- Timothy Van Zandt, 2004. "Information Overload in a Network of Targeted Communication," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 542-560, Autumn.
- Esteban, Lola & Gil, Agustin & Hernandez, Jose M, 2001. "Informative Advertising and Optimal Targeting in a Monopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 161-180, June.
- Dina Mayzlin, 2006. "Promotional Chat on the Internet," Marketing Science, INFORMS, vol. 25(2), pages 155-163, 03-04.
- Jeong-Yoo Kim & Tackseung Jun, 2004.
"A theory of consumer referral,"
Econometric Society 2004 Far Eastern Meetings
488, Econometric Society.
- Eyal Biyalogorsky & Eitan Gerstner & Barak Libai, 2001. "Customer Referral Management: Optimal Reward Programs," Marketing Science, INFORMS, vol. 20(1), pages 82-95, August.
- Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 465-491.
- Justin P. Johnson, 2013. "Targeted advertising and advertising avoidance," RAND Journal of Economics, RAND Corporation, vol. 44(1), pages 128-144, 03.
- Andrea Galeotti & Sanjeev Goyal, 2009. "Influencing the influencers: a theory of strategic diffusion," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 509-532.
When requesting a correction, please mention this item's handle: RePEc:emo:wp2003:1310. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sue Mialon)
If references are entirely missing, you can add them using this form.