R ed packets have symbolized happiness and good luck in Asian culture for centuries. An emerging number of online merchants in Asia are adopting social red packets as a promotion strategy. Social red packets not only digitalize traditional coupons to be readily transferred within consumer social networks but also can reallocate the promotional rewards based on consumers' social network value rather than their personal value to the firm. In this study, we conceptualize social red packets as an implementation of the social promotion framework, where consumers with higher social network value receive better promotional rewards. Leveraging a unique dataset from an online retailing platform, our vector autoregression (VAR) analysis reveals that: (1) under the social red packet design, consumers with higher social network value (who are connected to more new consumers or frequent consumers) will enjoy better promotional rewards; and (2) in order to receive better promotion rewards, consumers under the social red packet design are encouraged to voluntarily enhance their social network value (e.g., by recruiting more new customers or cultivating more frequent consumers). Moreover, we identify several critical characteristics of focal consumers and their social networks that can moderate the effectiveness of social red packets. Our findings provide important managerial insights for online retailing platforms on how to design effective social promotion strategies.

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We propose social pricing, a novel pricing framework under which consumers with higher social capital enjoy a better price. Conceptually, social pricing enables firms to achieve price discrimination based on a consumer’s social value. This is in sharp contrast with traditional price discrimination strategies where price differentiation typically hinges on consumers’ personal value. We design and conduct two randomized field experiments on a leading online fresh food retailer to understand the value of social pricing. Social pricing has been commonly credited for its effectiveness in new customer acquisition. Interestingly, our study reveals that it is also highly effective on existing consumers. Our analysis shows that social pricing can increase an online retailer’s profit by 40% solely from existing consumers, compared with regular firm-offered discounts. Exploration of the underlying mechanisms reveals that perceived engagement and social cost are the main drivers, which not only help to increase purchasing frequency but also induce higher order value per purchase. In a follow-up experiment, we vary the rules of social interactions by requiring heterogeneity in consumers’ purchasing frequencies. The results suggest that a heterogeneity-based strategy can further amplify the benefits of social pricing.

While prior research has generated meaningful insights into the antecedents of firms' corporate social responsibility (CSR), little attention has been devoted to examining the influence of CEO

Retailers are often short on capacity, so a logical assumption would be that retailers could improve their profits by acquiring more. In this study, we show that this is not necessarily true, because retailer's capacity has a strategic role in channel distribution. Specifically, we consider a setting with multiple suppliers and a common retailer. Our analysis reveals that, first, when the retailer's capacity is limited, its suppliers will compete head‐to‐head for the retailer's capacity, thereby driving down the equilibrium wholesale prices. Second, when the number of suppliers is large, the retailer finds it optimal to limit its own capacity to induce fierce competition among the suppliers. The result also holds when the suppliers and the retailer are contracted through two‐part tariffs. Third, when capacity is scarce, the retailer prefers two‐part tariffs to wholesale prices, while the suppliers prefer wholesale prices to two‐part tariffs. This is because two‐part tariffs enhance the retailer's capacity allocation power, which is translated into retailer profit. Nonetheless, when suppliers can freely choose between two‐part tariffs and wholesale prices, they always choose two‐part tariffs, leading to a form of prisoner's dilemma. We also demonstrate the robustness of our findings by considering substitutable and complementary products, exclusive contracts, and positive capacity cost. Our results underscore the importance of considering the retailer's capacity in channel management.