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<p>We rely on economic theory to show that, for any multi-level marketing (MLM) organization to be viable, the distributors of the same line (upline and downline) should not be in competition (Nash equilibrium) but in cooperation, and the product should feature some specific characteristics. We also find that, contrary to what happens in common business, the prices set by the distributors in MLM may be lower in cooperation than in Nash equilibrium, for some conditions on the demand function. Moreover, in MLM, unlike the non MLM setup, total profit may be higher in Nash equilibrium than in cooperation.</p>

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Viability of the Multi-level Marketing: Competition or Cooperation Between the Downline and the Upline?

  • 期刊论文

  • 发表日期：

    2025年11月20日

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  • Maxime Agbo

摘要

We rely on economic theory to show that, for any multi-level marketing (MLM) organization to be viable, the distributors of the same line (upline and downline) should not be in competition (Nash equilibrium) but in cooperation, and the product should feature some specific characteristics. We also find that, contrary to what happens in common business, the prices set by the distributors in MLM may be lower in cooperation than in Nash equilibrium, for some conditions on the demand function. Moreover, in MLM, unlike the non MLM setup, total profit may be higher in Nash equilibrium than in cooperation.