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Incentive-Compatible Advertising on Non-Retail Platforms

Spiegler, R; Eliaz, K; (2020) Incentive-Compatible Advertising on Non-Retail Platforms. RAND Journal of Economics (In press).

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Abstract

Non-retail platforms (e.g., online radio stations, social media) enable users to engage in various non-commercial activities, while at the same time generating user information that helps advertisers improve their targeting. We study novel incentive issues that arise when the platform tries to maximize its advertising revenues. In our model, the platform's policy consists of a personalized, stationary ad-display rule and an advertising fee (which the platform charges firms as a function of the consumer type they request to target). We provide conditions for the existence of an incentive-compatible policy that maximizes and fully extracts firms'surplus. This objective is easier to attain when the platform obtains more precise information about users' preferences. We apply our result to various examples of non-retail platforms, including content platforms and social networks. Our analysis of the latter turns out to be related to the "community detection" problem in Network Science.

Type: Article
Title: Incentive-Compatible Advertising on Non-Retail Platforms
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/10081265
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