Internet retailers often compete fiercely for consumers through expensive marketing efforts like search engine advertising, online coupons and a variety of special deals. Against this background, it is somewhat puzzling that many online retailers have recently begun referring their website visitors to their direct competitors. In this paper, using an analytical model, we examine this counterintuitive practice and posit that an entry deterrence motive can potentially explain this marketplace puzzle. Specifically, we develop a model where two incumbents compete for consumers” business while facing a potential entrant who is deciding whether to enter the market. In addition to setting the price, each incumbent firm could potentially display a referral link to its direct competitor. Our analysis reveals that when confronted with a potential entry, an incumbent may refer consumers to its competitor, intensifying the market competition that could result in shutting off the entrant. Furthermore, we show that when referral efficiency is exogenous, it is possible that in equilibrium only one incumbent refers its customers to competitor (i.e., one-way referral) or both incumbents refer their customers to each other (i.e, two-way referral). When referral efficiency is endogenous, the ex-ante symmetric incumbents may choose asymmetric referral efficiencies ex-post. We extend the model in a number of directions including making the entrant share endogenous and allowing incumbents to be asymmetric. Overall, our results indicate that firms may be motivated by entry deterrence to voluntarily refer consumers to their direct competitors even when they are paid nothing for the referral.

中文翻译：

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与敌人调情：在线竞争对手的推荐和进入威慑

互联网零售商通常通过昂贵的营销努力（例如搜索引擎广告，在线优惠券和各种特殊交易）与消费者展开激烈竞争。在这种背景下，令人感到困惑的是，许多在线零售商最近开始将其网站访问者推荐给直接竞争对手。在本文中，我们使用分析模型检验了这种违反直觉的做法，并认为进入威慑动机可以潜在地解释这一市场难题。具体来说，我们建立了一个模型，在该模型中，两家公司竞争消费者的业务，同时面对正在决定是否进入市场的潜在进入者。除了设定价格外，每个老牌公司还可能会显示与其直接竞争对手的推荐链接。我们的分析表明，面对潜在的进入，在位者可能会将消费者引向其竞争对手，从而加剧市场竞争，从而可能导致进入者被拒之门外。此外，我们表明，当推介效率是外生的时，有可能仅在平衡时一个任职者将其客户推荐给竞争对手（即单向推荐），或者两个任职者将其客户相互推荐（即单向推荐）。当推荐效率是内生的时，事前对称的现任者可以事后选择不对称的推荐效率。我们在多个方向上扩展了该模型，包括使进入者共享内生性并允许在位者不对称。总体而言，我们的结果表明，即使是由于转介而没有获得报酬，进入威慑也会促使企业自愿将消费者推荐给直接竞争对手。