IDEAS home Printed from https://ideas.repec.org/a/inm/oropre/v32y1984i3p527-536.html
   My bibliography  Save this article

Two Probability Models of Pyramid or Chain Letter Schemes Demonstrating that Their Promotional Claims are Unreliable

Author

Listed:
  • J. L. Gastwirth

    (George Washington University, Washington, D.C.)

  • P. K. Bhattacharya

    (University of California, Davis, California)

Abstract

A variety of chain letters and pyramid schemes continue to be offered to the public. This article reviews two probability models which were developed in response to requests by attorneys faced with prosecuting promoters of such ventures. The two models were designed to establish the fraud underlying a quota pyramid scheme (which places a limit on the maximum number of participants) and a chain letter in which a participant could sell only two letters (unless he purchases a new letter). The models emphasize how dependent a participant's potential earnings are to his time of entry in the process and show that although a small percentage of participants (some early entrants) will make money, most will lose so that pyramid scheme investors, as a class, are defrauded.

Suggested Citation

  • J. L. Gastwirth & P. K. Bhattacharya, 1984. "Two Probability Models of Pyramid or Chain Letter Schemes Demonstrating that Their Promotional Claims are Unreliable," Operations Research, INFORMS, vol. 32(3), pages 527-536, June.
    • Handle: RePEc:inm:oropre:v:32:y:1984:i:3:p:527-536
    DOI: 10.1287/opre.32.3.527
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/opre.32.3.527
    Download Restriction: no
    File URL: https://libkey.io/10.1287/opre.32.3.527?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yarong Feng & Hosam Mahmoud, 2018. "Profile of Random Exponential Binary Trees," Methodology and Computing in Applied Probability, Springer, vol. 20(2), pages 575-587, June.
    2. Altok, S. & Işlak, Ü., 2017. "On leaf related statistics in recursive tree models," Statistics & Probability Letters, Elsevier, vol. 121(C), pages 61-69.
    3. Hosam Mahmoud, 2022. "Profile of Random Exponential Recursive Trees," Methodology and Computing in Applied Probability, Springer, vol. 24(1), pages 259-275, March.
    4. Antler, Yair, 2018. "Multilevel Marketing: Pyramid-Shaped Schemes or Exploitative Scams?," CEPR Discussion Papers 13054, C.E.P.R. Discussion Papers.
    5. Antler, Yair, 2023. "Multilevel marketing: pyramid-shaped schemes or exploitative scams?," Theoretical Economics, Econometric Society, vol. 18(2), May.
    6. Yong Shi & Bo Li & Guangle Du, 2021. "Pyramid scheme in stock market: a kind of financial market simulation," Papers 2102.02179, arXiv.org, revised Feb 2021.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:oropre:v:32:y:1984:i:3:p:527-536. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.