Pricing game of online display advertisement publishers

Pricing game of online display advertisement publishers

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Article ID: iaor20122122
Volume: 219
Issue: 2
Start Page Number: 477
End Page Number: 487
Publication Date: Jun 2012
Journal: European Journal of Operational Research
Authors: ,
Keywords: advertising, optimization, game theory, simulation: applications
Abstract:

We consider online display advertisement publishers who maximize the revenue by optimal pricing in an oligopoly setting. Each publisher interacts with others through setting cost‐per‐impression (CPM) that affects the demand for everyone. Using the pseudoconcavity of the objective function, we prove that a unique best response Nash equilibrium exists for each publisher. We also consider the sensitivity of the publisher while other publishers changes their CPM. In both cases, the best response of the publisher depends entirely on her current best response CPM. We provide an algorithm for finding the equilibrium and illustrate by numerical examples.

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