On click-fraud under pro-rata revenue sharing rule

Hao Yu

Papers from arXiv.org

Abstract: Click-fraud is commonly seen as a key vulnerability of pro-rata revenue sharing on music streaming platforms, whereas user-centric is largely immune. This paper develops a tractable non-cooperative model in which artists can purchase fraud activity that generates undetectable fake streams up to a technological limit. We show that pro-rata can be fraud-robust: when fraud technology is weak, honesty is a strict dominant strategy, and an efficient fraud-free equilibrium obtains. When fraud technology is strong, a unique fraud equilibrium arises, yet aggregate fake streams remain bounded. Although fraud is inefficient, the resulting redistribution may improve fairness in some cases. To mitigate fraud without abandoning pro-rata, we introduce a parametric weighted rule that interpolates between pro-rata and user-centric, and characterize parameter ranges that restore a fraud-free equilibrium under technology constraint. We also discuss implications of Spotify's modernized royalty system for fraud incentives.

Date: 2026-01
New Economics Papers: this item is included in nep-cul, nep-gth and nep-pay
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