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Endogenous Choice On Advertising Pricing Of Media Platforms: Lump-Sum Fee Vs. Proportional Fee

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  • PAN, LIJUN

Abstract

Media platforms face the choice between lump-sum and proportional fees when they charge advertisers. This paper builds a two-stage dynamic game model to solve an endogenous choice problem with regard to the advertising pricing instruments of two media platforms. If either the proportional fee or the lump-sum fee is feasible, the dominant strategy for both platforms is to charge advertisers a proportional fee. This explains why online media platforms prefer to charge advertisers the proportional fee. We also examine the asymmetric pricing between two platforms that adopt different advertising schemes, which sheds light on the competition between online media and traditional media.

Suggested Citation

  • Pan, Lijun, 2017. "Endogenous Choice On Advertising Pricing Of Media Platforms: Lump-Sum Fee Vs. Proportional Fee," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 58(1), pages 21-40, June.
    • Handle: RePEc:hit:hitjec:v:58:y:2017:i:1:p:21-40
    DOI: 10.15057/28616
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    References listed on IDEAS

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    1. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Gang Liu & Fengyue An, 2021. "Video Platforms’ Value-Added Service Investments and Pricing Strategies for Advertisers," Sustainability, MDPI, vol. 13(24), pages 1-24, December.

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    More about this item

    Keywords

    media market; price instruments; two-sided platforms; endogenous choice; lump-sum fee; proportional fee;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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