Word-of-Mouth marketing, network-based marketing, social & economic network, social learning, mechanism design, applied microeconomic theory
On the Design of Referral Programmes (Job market paper) [Link]
Abstract: I study the design of customer referral programmes by constructing a stylized static principal-agent model with hidden actions, in which a firm designs a referral programme to incentivize an existing customer to exert costly efforts to refer the customer’s friends to the firm. In the baseline model, this paper finds it optimal for the firm to pay the customer if and only if every friend of the customer’s is successfully referred. In a number of extensions that are important and relevant to referral programmes, although the optimal referral contract is no longer a threshold contract, this class of contracts still plays an important role in the optimal referral programme design. Overall, this paper finds it cost-effective to include threshold contracts to incentivize efforts. Additionally, this paper provides a complete ordering of different threshold contracts on cost-effectiveness with easily interpretable insights. Lastly, to better relate this paper to the existing literature on hidden-action models, I provide and discuss sufficient conditions under which the result of highest-threshold optimality holds.
Abstract: We consider a model in which an amusement park sells different priority passes to customers in a queue whose utilities depend on positions in the queue. A customer’s valuation of a priority pass depends on the number of customers buying a higher-or-equal priority pass. Hence other customers’ purchase decisions have an externality on the customer’s valuation, which differentiates our model from the standard screening model. This paper discusses the implementability of selling multiple passes for different pattern of customer utility functions. We show that the externality makes the implementation of multi-pass schemes difficult, an issue that persists even when customers have heterogeneous utilities of positions in a queue.
Work in Progress
A Model of Sponsored Reviews
Pricing Under Product Diffusion with Survival Bias