In many industries, firms reward their customers for making referrals. We analyze the optimal policy mix of price, advertising intensity, and referral fee for a 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...

We study a competitive market for a homogeneous good, in which the only uncertainty concerns the number of identical sellers, who are sampled by a finite Poisson process from a continuum of potential participants. It is shown that, in equilibrium, there is price dispersion. Specifically, prices...

When physically similar products, of similar quality, are offered by retailers both online and offline, we often observe that the dispersion in prices of these products online is greater than the price dispersion offline. This observation runs counter to early theories that suggested price...

This research proposes an analytical model of the joint optimization of coupon face value and duration together with the product price, and determines the impact of coupon design on consumers’ redemption behavior. A model of rational forward-looking consumers’ redemption behavior is derived...

Independent of the left-right model of ideological structure, genetically modified organisms (GMOs) in food and agriculture are resented across the political spectrum in Switzerland. In the absence of any real experience with genetically modified (GM) food but faced with continuous exposure to...

Buying frenzies in which a fi rm intentionally undersupplies a product during its initial launch phase are a common practice within several industries such as electronics (cell phones, video games, game consoles), luxury cars, and fashion goods. We develop a dynamic model of buying frenzies that...

Third-party sellers in online marketplaces provide wide product/service variety and are highly heterogeneous in the capability of delivering value to buyers. Seller variety and value heterogeneity shape seller competition, which then affects the marketplace owner’s profit. This paper presents...

This paper analyzes consumer inattention in the market of checking accounts. I examine the behavior of consumers who keep account tariffs that are dominated, i.e. that charge higher costs for any amount of bank services consumed through the account, by tariffs available at the same bank and...

Information frictions play a key role in an array of economic activities and are frequently incorporated into formal models as search costs. However, little is known about the underlying source of consumer search costs and how heterogeneous they are across consumers and markets. This paper...

A standard "solution" offered to the deleterious effects of all-out price competition is for firms to engage in differentiation strategies. This solution, however, depends critically on the inability of rivals to imitate a successful differentiation strategy. With imitation, we show how "Red...