An economic model of multi-level marketing.

This paper offers an economic model of the operation of multi-level marketing (MLM) firms in competitive and non-competitive markets. The model takes a recursive approach to analyse decision making at the distributor level in order to understand basic issues in the MLM market and firm structure. Spe...

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Autor principal:	Yaniv Reingewertz
Formato:	article
Lenguaje:	EN
Publicado:	Public Library of Science (PLoS) 2021
Materias:	Medicine R Science Q
Acceso en línea:	https://doaj.org/article/21822d5bf9f24b33bde13575e0112bbf
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spelling	oai:doaj.org-article:21822d5bf9f24b33bde13575e0112bbf2021-12-02T20:09:06ZAn economic model of multi-level marketing.1932-620310.1371/journal.pone.0253700https://doaj.org/article/21822d5bf9f24b33bde13575e0112bbf2021-01-01T00:00:00Zhttps://doi.org/10.1371/journal.pone.0253700https://doaj.org/toc/1932-6203This paper offers an economic model of the operation of multi-level marketing (MLM) firms in competitive and non-competitive markets. The model takes a recursive approach to analyse decision making at the distributor level in order to understand basic issues in the MLM market and firm structure. Specifically, it is shown that under reasonable assumptions MLM firms will have a limited structure. In cases where commissions increase with the number of levels, MLM firms will include no more than six to nine levels in equilibrium. In cases of fixed commissions, market conditions dictate a cap on the number of distributors. These conditions imply a limited "multi-level" structure. They also imply that the revenues of the median distributor are mainly a result of direct sales and not a result of commissions. The model also suggests that MLM firms will only arise where marketing costs are substantial, and that it is primarily individuals with small outside offers who choose to become distributors. Finally, the model provides a formula that calculates market prices for a monopoly MLM firm.Yaniv ReingewertzPublic Library of Science (PLoS)articleMedicineRScienceQENPLoS ONE, Vol 16, Iss 7, p e0253700 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	Medicine R Science Q
spellingShingle	Medicine R Science Q Yaniv Reingewertz An economic model of multi-level marketing.
description	This paper offers an economic model of the operation of multi-level marketing (MLM) firms in competitive and non-competitive markets. The model takes a recursive approach to analyse decision making at the distributor level in order to understand basic issues in the MLM market and firm structure. Specifically, it is shown that under reasonable assumptions MLM firms will have a limited structure. In cases where commissions increase with the number of levels, MLM firms will include no more than six to nine levels in equilibrium. In cases of fixed commissions, market conditions dictate a cap on the number of distributors. These conditions imply a limited "multi-level" structure. They also imply that the revenues of the median distributor are mainly a result of direct sales and not a result of commissions. The model also suggests that MLM firms will only arise where marketing costs are substantial, and that it is primarily individuals with small outside offers who choose to become distributors. Finally, the model provides a formula that calculates market prices for a monopoly MLM firm.
format	article
author	Yaniv Reingewertz
author_facet	Yaniv Reingewertz
author_sort	Yaniv Reingewertz
title	An economic model of multi-level marketing.
title_short	An economic model of multi-level marketing.
title_full	An economic model of multi-level marketing.
title_fullStr	An economic model of multi-level marketing.
title_full_unstemmed	An economic model of multi-level marketing.
title_sort	economic model of multi-level marketing.
publisher	Public Library of Science (PLoS)
publishDate	2021
url	https://doaj.org/article/21822d5bf9f24b33bde13575e0112bbf
work_keys_str_mv	AT yanivreingewertz aneconomicmodelofmultilevelmarketing AT yanivreingewertz economicmodelofmultilevelmarketing
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An economic model of multi-level marketing.

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