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