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Monetizing digital content with network effects: A mechanism-design approach

Author

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  • Vincent Meisner
  • Pascal Pillath

Abstract

We design the profit-maximizing mechanism to sell an excludable and non-rival good with network effects. Buyers have heterogeneous private values that depend on how many others also consume the good. In optimum, an endogenous number of the highest types shares consumption, and we provide an algorithm that implements this allocation in dominant strategies. We apply our insights to digital content creation, and we are able to rationalize features seen in monetization schemes in this industry such as voluntary contributions, community subsidies, and exclusivity bids.

Suggested Citation

  • Vincent Meisner & Pascal Pillath, 2024. "Monetizing digital content with network effects: A mechanism-design approach," Berlin School of Economics Discussion Papers 0049, Berlin School of Economics.
    • Handle: RePEc:bdp:dpaper:0049
    DOI: 10.48462/opus4-5605
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    More about this item

    Keywords

    Mechanism design; non-rival goods; club goods; network effects; digital content; creator economy;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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