Abstract
We construct an economic model of the way a multi-level marketing (MLM) firm operates. The model is analysing the decision making process at the distributor level. We use this model to understand which markets will include MLM firms, what will be the magnitude of the commission fees that the MLM firm chooses, which individuals will choose to become distributors, how many levels the MLM will include, and how a monopoly MLM firm will price its products.
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