Incentives for electronic coupon systems

Abstract

Ad hoc networks and peer-to-peer systems typically require many users to participate, in order to leverage the full benefits of the system. In this paper we examine an electronic coupon system, where providers send out coupons, which are passed from user to user. The incentive for users to participate is that they receive bonus points for each redemption of the coupon. The contributions of this paper are two-fold. First, we define a general model for such bonus point -based coupon schemes and derive an optimal strategy which allows each user to determine how many bonus points she should ask for when passing the coupon. Second, we show that our optimal strategy is extremely robust against all other user strategies, and that there is a strong incentive for users to follow our optimal strategy.