Managing Consumer Referrals on a Chain Network

Forthcoming in the Review of Network Economics

35 Pages Posted: 19 Nov 2014 Last revised: 20 Nov 2014

Date Written: March 17, 2014

Abstract

We consider a monopoly that sets a price and differentiated referral fees to spread product information along a simple consumer communication network (a chain). The profit-maximizing solution 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 both in the case of differentiated referral fees and in the case of uniform referral fees.

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

JEL Classification: D4, D8, L1, M31

Suggested Citation

Arbatskaya, Maria and Konishi, Hideo, Managing Consumer Referrals on a Chain Network (March 17, 2014). Forthcoming in the Review of Network Economics, Available at SSRN: https://ssrn.com/abstract=2526432

Hideo Konishi

Boston College - Department of Economics ( email )

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No contact information is available for Maria Arbatskaya

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