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Managing Consumer Referrals on a Chain Network

Author

Listed:
  • Arbatskaya Maria

    (Department of Economics, Emory University, Atlanta, GA 30322-2240, Phone: +(404) 727 2770, Fax: +(404) 727 4639)

  • Konishi Hideo

    (Department of Economics, Boston College, 140 Commonwealth Avenue, Chestnut Hill, MA 02467, USA)

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.

Suggested Citation

  • Arbatskaya Maria & Konishi Hideo, 2014. "Managing Consumer Referrals on a Chain Network," Review of Network Economics, De Gruyter, vol. 13(1), pages 69-94, March.
    • Handle: RePEc:bpj:rneart:v:13:y:2014:i:1:p:69-94:n:4
    DOI: 10.1515/rne-2014-0002
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    References listed on IDEAS

    as
    1. Jun, Tackseung & Kim, Jeong-Yoo, 2008. "A theory of consumer referral," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 662-678, May.
    2. Simon P. Anderson & André De Palma, 2009. "Information congestion," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 688-709, December.
    3. Arbatskaya, Maria & Konishi, Hideo, 2016. "Consumer referrals," International Journal of Industrial Organization, Elsevier, vol. 48(C), pages 34-58.
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    1. Arbatskaya, Maria & Konishi, Hideo, 2016. "Consumer referrals," International Journal of Industrial Organization, Elsevier, vol. 48(C), pages 34-58.

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    More about this item

    Keywords

    communication network; consumer referral policy; price discrimination; referral fee;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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