Mechanism Design and Innovation Incentive for an Ad-Funded Platform

Doh-Shin Jeon, Shota Ichihashi and Byung-Cheol Kim

No 24-1591, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We study a mechanism design problem of a monopoly platform that matches content of varying quality, ads with dierent ad revenues, and consumers with heterogeneous tastes for content quality. The optimal mechanism balances revenue from advertising and revenue from selling access to content: Increasing advertising revenue requires serving content to more consumers, which may reduce access revenue. Contrary to the standard monopolistic screening, the platform may serve content to consumers with negative virtual values while, to reduce information rents, limiting their access to higher-quality content. Then, an increase in ad protability reduces its incentive to invest in content quality.

JEL-codes: D42 D82 L15 O31 (search for similar items in EconPapers)
Date: 2024-11-13
New Economics Papers: this item is included in nep-com, nep-cta, nep-des, nep-ind, nep-mic and nep-reg
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