Tallinn University of Technology

''Multilevel Marketing: Pyramid-Shaped Schemes or Exploitative Scams?''

Wednesday, 23 September 2020 at 16:00-17:00 via MS Teams.

Yair Antler (Tel Aviv University)


Motivated by the growing discussion on the legitimacy of multilevel marketing schemes and their resemblance to pyramid scams, we compare the two phenomena based on their underlying compensation structures. We identify the conditions on the tendency of agents to spread information by word of mouth, under which a principal can design a pyramid scam to exploit a network of agents whose beliefs are coarse. We find that a pyramid scam is sustainable only if its underlying reward scheme compensates each participant based on at least two levels of recruitment, i.e., the people he recruits and the people they recruit.

The public research seminars of the Department of Economics and Finance (DEF) at Tallinn University of Technology  usually take place on the second and fourth Wednesdays of the month in both onsite and online format, unless announced otherwise. The presentation will last approximately 45 minutes followed by 15 minutes of discussion. The seminars are held in English. Copies of the paper are usually made available at the seminar. The DEF seminar series is organised in collaboration with the project ”Individual Behaviour and Economic  Performance: Methodological  Challenges and Institutional Context” (IBEP) [www.taltech.ee/ibep], which has received funding from the European Union’s Horizon 2020 Research and Innovation programme under Grant Agreement No 952574. 

Questions about the seminar can be sent to the IBEP seminar coordinator Rachatar Nilavongse.