eprintid: 10081749 rev_number: 15 eprint_status: archive userid: 608 dir: disk0/10/08/17/49 datestamp: 2019-09-16 12:19:57 lastmod: 2022-05-30 13:58:00 status_changed: 2019-09-16 12:19:57 type: article metadata_visibility: show creators_name: Carroni, E creators_name: Pin, P creators_name: Righi, S title: Bring a friend! Privately or Publicly? ispublished: pub divisions: UCL divisions: A01 divisions: B04 divisions: C05 divisions: F48 note: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. abstract: We study the optimal referral strategy of a seller and its relationship with the type of communication channels among consumers. The seller faces a partially uninformed population of consumers, interconnected through a directed social network. In the network, the seller offers rewards to informed consumers (influencers) conditional on inducing purchases by uninformed consumers (influenced). Rewards are needed to bear a communication cost and to induce word-of-mouth (WOM) either privately (cost-per-contact) or publicly (fixed cost to inform all friends). From the seller's viewpoint, eliciting Private WOM is more costly than eliciting Public WOM. We investigate (i) the incentives for the seller to move to a denser network, inducing either Private or Public WOM and (ii) the optimal mix between the two types of communication. A denser network is found to be always better, not only for information diffusion but also for seller's profits, as long as Private WOM is concerned. Differently, under Public WOM, the seller may prefer an environment with less competition between informed consumers and the presence of highly connected influencers (hubs) is the main driver to make network density beneficial to profits. When the seller is able to discriminate between Private and Public WOM, the optimal strategy is to cheaply incentivize the more connected people to pass on the information publicly and then offer a high bonus for Private WOM. date: 2019-05 official_url: https://doi.org/10.1287/mnsc.2018.3282 oa_status: green full_text_type: other language: eng primo: open primo_central: open_green article_type_text: Article verified: verified_manual elements_id: 1569293 doi: 10.1287/mnsc.2018.3282 lyricists_name: Righi, Simone lyricists_id: SRIGH29 actors_name: Stacey, Thomas actors_id: TSSTA20 actors_role: owner full_text_status: public publication: Management Science volume: 66 number: 5 pagerange: 2269-2290 citation: Carroni, E; Pin, P; Righi, S; (2019) Bring a friend! Privately or Publicly? Management Science , 66 (5) pp. 2269-2290. 10.1287/mnsc.2018.3282 <https://doi.org/10.1287/mnsc.2018.3282>. Green open access document_url: https://discovery.ucl.ac.uk/id/eprint/10081749/1/Righi%20CarroniPinRighi_MS_May14_final.pdf