Consumer Referrals

Maria Arbatskaya and Hideo Konishi

No 851, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: In many industries, firms reward their customers for making referrals. We analyze the optimal policy mix of price, advertising intensity, and referral fee for monopoly when buyers choose to what extent to refer other consumers to the firm. We find that the firm uses its referral fee, but not its price or advertising level, to manage referrals. When consumers hold correct expectations about the true quality of the product, the firm charges the standard monopoly price. The firm always advertises less when it uses referrals. We extend the analysis to the case where consumer referrals can be targeted.

Keywords: consumer referral policy; word of mouth; referral reward program; targeted advertising; product awareness (search for similar items in EconPapers)
JEL-codes: C7 D4 D8 L1 (search for similar items in EconPapers)
Date: 2013-10-21, Revised 2016-11-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published, International Journal of Industrial Organization 48, 34-58, 2016

Downloads: (external link)
http://fmwww.bc.edu/EC-P/wp851.pdf main text (application/pdf)

Related works:
Journal Article: Consumer referrals (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:851

Access Statistics for this paper

More papers in Boston College Working Papers in Economics from Boston College Department of Economics Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F Baum ().