College of Business Administration

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Open Access
In-store referrals on the internet
(2012-03-21) Cai, Gangshu; Chen, Ying-Ju; gcai
In the contemporary e-business, a retailer may display the links to the competing retailers directly (direct referral), or display the referral link provided by a third-party advertising agency (third-party referral), and these referrals may be either one-way or two-way. In this paper, we show that the referrals may align the retailers’ incentives and facilitate implicit collusion, and one-way referral may result in a win-win situation, thereby providing an economic rationale for these seemingly puzzling phenomena. Using third-party referrals may enhance the retail-ers’ collusion despite the potential disutility and revenue leakage, and referral services may be detrimental for the consumer welfare.