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Network-based Referral Mechanism in a Crowdfunding-based Marketing Pattern

Yongli Li, Zhi-Ping Fan and Wei Zhang

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Abstract: Crowdfunding is gradually becoming a modern marketing pattern. By noting that the success of crowdfunding depends on network externalities, our research aims to utilize them to provide an applicable referral mechanism in a crowdfunding-based marketing pattern. In the context of network externalities, measuring the value of leading customers is chosen as the key to coping with the research problem by considering that leading customers take a critical stance in forming a referral network. Accordingly, two sequential-move game models (i.e., basic model and extended model) were established to measure the value of leading customers, and a skill of matrix transformation was adopted to solve the model by transforming a complicated multi-sequence game into a simple simultaneous-move game. Based on the defined value of leading customers, a network-based referral mechanism was proposed by exploring exactly how many awards are allocated along the customer sequence to encourage the leading customers' actions of successful recommendation and by demonstrating two general rules of awarding the referrals in our model setting. Moreover, the proposed solution approach helps deepen an understanding of the effect of the leading position, which is meaningful for designing more numerous referral approaches.

New Economics Papers: this item is included in nep-gth
Date: 2018-08
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