Multi-level marketing refers to a marketing approach in which buyers are encouraged to take an active role in promoting the product. This is done by offering them a reward for each successful referral of the product to other prospective buyers. To encourage potential customers to buy early and to give referrals to influential people, these mechanisms also reward indirect referrals — direct referrals linked to the buyer through other direct referrals. We model referrals using a directed referral tree T. Each node in T corresponds to a buyer. T has an edge from v to u if u buys the product as a result of a referral from v. A reward mechanism determines the reward, R(v), that each node v ∈ T receives for its direct and indirect referrals.
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