Preferential attachment model of multilevel marketing

Abstract

Multilevel marketing (MLM) companies, or network marketing organizations, are business channels that use their consumers as advertisers and recruiters of the organization. In this paper, binary MLM is modeled using the framework of agentbased modeling. Combining and comparing analytic and numerical approaches, we quantify the network structure and the profit distribution among agents. The recruitment is conjecture to obey a directed preferential-attachment dynamics that can be treated analytically following the Barabasi-Albert approach. Our results suggest that profit sharing among agents in existing binary plans naturally settles to a Pareto distribution.