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Pay for Content or Pay for Marketing? An Empirical Study on Content Pricing

Author

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  • Xintong Han

    () (Concordia University, Department of Economics, 1455 Boulevard de Maisonneuve O, Montreal, QC H3G 1M8, Canada.)

  • Pu Zhao

    () (Boston University, Questrom School of Business, 595 Commonwealth Avenue, Boston, MA 02215, USA.)

Abstract

In this paper, we use unique data from a popular Chinese content provision platform to examine three issues: first, content providers’ pricing strategies when each follower needs to pay an annual fee for access to content; second, content providers’ trade-offs between traffic and referral marketing expenses; and third, the effect of a platform policy on the welfare of content providers and their followers. We use a structural model for a content provider’s pricing and referral marketing decisions. The model estimates highlight the link between the referral effectiveness and potential revenue loss. Our counterfactual analysis shows vast difference in communities’ reactions towards increased platform commissions and potential homogeneity of content provision as well as huge demand loss beyond certain commission thresholds.

Suggested Citation

  • Xintong Han & Pu Zhao, 2019. "Pay for Content or Pay for Marketing? An Empirical Study on Content Pricing," Working Papers 19-03, NET Institute.
  • Handle: RePEc:net:wpaper:1903
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    File URL: http://www.netinst.org/Han_19-03.pdf
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    References listed on IDEAS

    as
    1. Eyal Biyalogorsky & Eitan Gerstner & Barak Libai, 2001. "Customer Referral Management: Optimal Reward Programs," Marketing Science, INFORMS, vol. 20(1), pages 82-95, August.
    2. Laura J. Kornish & Qiuping Li, 2010. "Optimal Referral Bonuses with Asymmetric Information: Firm-Offered and Interpersonal Incentives," Marketing Science, INFORMS, vol. 29(1), pages 108-121, 01-02.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    content pricing; referral marketing; platform policy; structural estimation;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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