IDEAS home Printed from https://ideas.repec.org/a/bla/randje/v51y2020i2p323-345.html
   My bibliography  Save this article

Incentive‐compatible advertising on nonretail platforms

Author

Listed:
  • Kfir Eliaz
  • Ran Spiegler

Abstract

Nonretail platforms enable users to engage in noncommercial activities, while generating user information that helps ad targeting. We present a model in which the platform chooses a personalized ad‐display rule and an advertising fee (which depends on the targeted user group). The policy that maximizes the platform's advertising revenues creates an incentive for advertisers to strategize targeting. We provide a condition for incentive‐compatibility of the first‐best policy, and highlight the forces that make it harder to satisfy. We apply our result to examples of platforms. Our analysis of social networks turns out to be related to the “community‐detection” problem.

Suggested Citation

  • Kfir Eliaz & Ran Spiegler, 2020. "Incentive‐compatible advertising on nonretail platforms," RAND Journal of Economics, RAND Corporation, vol. 51(2), pages 323-345, June.
    • Handle: RePEc:bla:randje:v:51:y:2020:i:2:p:323-345
    DOI: 10.1111/1756-2171.12316
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1756-2171.12316
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1756-2171.12316?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Yann Bramoullé & Andrea Galeotti & Brian Rogers, 2016. "The Oxford Handbook of the Economics of Networks," Post-Print hal-03572533, HAL.
    2. Francis Bloch, 2016. "Targeting and pricing in social networks," Post-Print hal-01309549, HAL.
    3. James D. Campbell, 2015. "Localized price promotions as a quality signal in a publicly observable network," Quantitative Marketing and Economics (QME), Springer, vol. 13(1), pages 27-57, March.
    4. Yann Bramoullé & Andrea Galeotti & Brian Rogers, 2016. "The Oxford Handbook of the Economics of Networks," Post-Print hal-01447842, HAL.
    5. Dirk Bergemann & Alessandro Bonatti, 2011. "Targeting in advertising markets: implications for offline versus online media," RAND Journal of Economics, RAND Corporation, vol. 42(3), pages 417-443, September.
    6. Galeotti Andrea & Goyal Sanjeev, 2012. "Network Multipliers: The Optimality of Targeting Neighbors," Review of Network Economics, De Gruyter, vol. 11(3), pages 1-11, September.
    7. Justin P. Johnson, 2013. "Targeted advertising and advertising avoidance," RAND Journal of Economics, RAND Corporation, vol. 44(1), pages 128-144, March.
    8. Itay P. Fainmesser & Andrea Galeotti, 2016. "Pricing Network Effects," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(1), pages 165-198.
    9. Susan Athey & Joshua S. Gans, 2010. "The Impact of Targeting Technology on Advertising Markets and Media Competition," American Economic Review, American Economic Association, vol. 100(2), pages 608-613, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yongyi Zhou & Yulin Zhang & Mark Goh, 2021. "Choice of pricing and advertising schemes for a two‐sided platform," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1865-1885, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Elias Carroni & Paolo Pin & Simone Righi, 2020. "Bring a Friend! Privately or Publicly?," Management Science, INFORMS, vol. 66(5), pages 2269-2290, May.
    2. Jadbabaie, Ali & Kakhbod, Ali, 2019. "Optimal contracting in networks," Journal of Economic Theory, Elsevier, vol. 183(C), pages 1094-1153.
    3. Arthur Campbell & C. Matthew Leister & Yves Zenou, 2020. "Word‐of‐mouth communication and search," RAND Journal of Economics, RAND Corporation, vol. 51(3), pages 676-712, September.
    4. Panebianco, Fabrizio & Verdier, Thierry & Zenou, Yves, 2016. "Innovation, Pricing and Targeting in Networks," CEPR Discussion Papers 11398, C.E.P.R. Discussion Papers.
    5. Eliaz, Kfir & Spiegler, Ran, 2016. "Incentive Compatible Advertising on a Social Network," CEPR Discussion Papers 11223, C.E.P.R. Discussion Papers.
    6. Zenou, Yves & Chen, Ying-Ju & Zhou, Junjie, 2020. "Network Topology and Market Structure," CEPR Discussion Papers 14495, C.E.P.R. Discussion Papers.
    7. Andrea Galeotti & Benjamin Golub & Sanjeev Goyal, 2020. "Targeting Interventions in Networks," Econometrica, Econometric Society, vol. 88(6), pages 2445-2471, November.
    8. Andreas Hefti & Shuo Liu, 2020. "Targeted information and limited attention," RAND Journal of Economics, RAND Corporation, vol. 51(2), pages 402-420, June.
    9. Zhao Jiang & Dan Wu, 2022. "Targeting Precision in Imperfect Targeted Advertising: Implications for the Regulation of Market Structure and Efficiency," SAGE Open, , vol. 12(1), pages 21582440221, March.
    10. Steven Schmeiser, 2018. "Sharing Audience Data: Strategic Participation in Behavioral Advertising Networks," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(3), pages 429-450, May.
    11. Simon P. Anderson & Bruno Jullien, 2015. "The advertising-financed business model in two-sided media markets," Post-Print hal-02866192, HAL.
    12. Alexei Parakhonyak & Nick Vikander, 2019. "Optimal Sales Schemes for Network Goods," Management Science, INFORMS, vol. 65(2), pages 819-841, February.
    13. Zhao Jiang & Wu Dan & Liu Jie, 2020. "Distinct role of targeting precision of Internet-based targeted advertising in duopolistic e-business firms’ heterogeneous consumers market," Electronic Commerce Research, Springer, vol. 20(2), pages 453-474, June.
    14. Atabek Atayev & Maarten Janssen, 2021. "Information Acquisition and Diffusion in Markets," Papers 2109.15288, arXiv.org.
    15. Anna D’Annunzio & Antonio Russo, 2020. "Ad Networks and Consumer Tracking," Management Science, INFORMS, vol. 66(11), pages 5040-5058, November.
    16. Fujisawa, Chieko & Kasuga, Norihiro, 2021. "How should durable goods firms combine online and mass media advertisements to promote sales?," 23rd ITS Biennial Conference, Online Conference / Gothenburg 2021. Digital societies and industrial transformations: Policies, markets, and technologies in a post-Covid world 238023, International Telecommunications Society (ITS).
    17. Zenou, Yves & Bochet, Olivier & Faure, Mathieu & Long, Yan, 2020. "Perceived Competition in Networks," CEPR Discussion Papers 15582, C.E.P.R. Discussion Papers.
    18. Evensen, Charlotte Bjørnhaug & Haugen, Atle, 2021. "The impact of targeting technologies and consumer multi-homing on digital platform competition," Discussion Paper Series in Economics 13/2021, Norwegian School of Economics, Department of Economics.
    19. Peitz, Martin & Reisinger, Markus, 2014. "The Economics of Internet Media," Working Papers 14-23, University of Mannheim, Department of Economics.
    20. Flavio Pino, 2022. "The microeconomics of data – a survey," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(3), pages 635-665, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:randje:v:51:y:2020:i:2:p:323-345. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/randdus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.