An economic analysis of maximally representative allocations

Within online advertising, there has been remarkable growth in display advertising. Our study focuses on the publisher’s allocation of its targeted advertising inventory – to this end, we employ the Hotelling model and use maximally representative allocation in our calculations. We then determine the supremum and infimum prices of a guaranteed contract allocated to advertisers. Rather significantly, our model provides a hybrid channel strategy for a publisher that allows the traditional method of targeted advertising and real-time bidding to coexist. We thus demonstrate the difference in each strategy’s outcome. The study reveals that the revenue of the publisher increases when it employs a hybrid channel strategy. Further, advertisers can bid for real-time bidding impressions in pursuit of high user conversion and simultaneously purchase a guaranteed contract in advance to reduce risk under conditions of sufficient funding.