Gan, Tan 
ORCID: 0000-0002-9483-7869
(2024)
Robust advertisement pricing.
.
Social Science Research Network (SSRN).
Abstract
We consider the robust pricing problem of an advertising platform that charges a producer for disclosing hard evidence of product quality to a consumer before trading. Multiple equilibria arise since consumer beliefs and producer’s contingent advertisement purchases are interdependent. To tackle strategic uncertainty, the platform offers each producer’s quality type a menu of disclosure-probability-and-price plans to maximize its revenue guaranteed across all equilibria. The optimal menus offer a continuum of plans with strictly increasing marginal prices for higher disclosure probabilities. Full disclosure is implemented in the unique equilibrium. All partial-disclosure plans, though off-path, preclude bad equilibrium play. This solution admits a tractable price function that suggests volume-based pricing can outperform click-based pricing when strategic uncertainty is accounted for. Moreover, the platform prioritizes attracting higher types into service and offers them higher rents despite symmetric information between the platform and the producer.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Divisions: | LSE |
| Subjects: | H Social Sciences > HB Economic Theory |
| JEL classification: | D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory L - Industrial Organization > L8 - Industry Studies: Services > L86 - Information and Internet Services; Computer Software M - Business Administration and Business Economics; Marketing; Accounting > M3 - Marketing and Advertising > M37 - Advertising |
| Date Deposited: | 19 Sep 2024 11:30 |
| Last Modified: | 19 Dec 2024 00:24 |
| URI: | http://eprints.lse.ac.uk/id/eprint/125464 |
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