ENDOGENOUS CHOICE ON ADVERTISING PRICING OF MEDIA PLATFORMS: LUMP-SUM FEE VS. PROPORTIONAL FEE

Media platforms face the choice between lump-sum and proportional fees when they charge advertisers. This paper builds a two-stage dynamic game model to solve an endogenous choice problem with regard to the advertising pricing instruments of two media platforms. If either the proportional fee or the...

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Bibliographic Details
Published in:	Hitotsubashi journal of economics Vol. 58; no. 1; pp. 21 - 40
Main Author:	Pan, Lijun
Format:	Journal Article
Language:	English
Published:	Tokyo Hitotsubashi University 01-06-2017
Subjects:	Advertisers Advertising Advertising media Advertising rates Area of dominant influence Comparative advertising Consumer advertising Consumer prices Economic competition Economic theory Endogenous Fees Fees & charges Market prices Market share Pricing policies Studies
Online Access:	Get full text
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Summary:	Media platforms face the choice between lump-sum and proportional fees when they charge advertisers. This paper builds a two-stage dynamic game model to solve an endogenous choice problem with regard to the advertising pricing instruments of two media platforms. If either the proportional fee or the lump-sum fee is feasible, the dominant strategy for both platforms is to charge advertisers a proportional fee. This explains why online media platforms prefer to charge advertisers the proportional fee. We also examine the asymmetric pricing between two platforms that adopt different advertising schemes, which sheds light on the competition between online media and traditional media.
ISSN:	0018-280X 2436-097X
DOI:	10.15057/28616