On the Optimality of Clickthrough Fees in Online Markets

Bibliographic Data

ID9706301
AuthorsMichael R Baye (Indiana University), Xiaxun Gao (University of Miami‐Ohio), John Morgan (0000-0001-9224-5483, University of California, Berkeley), John W Morgan (0000-0003-2003-5983, University of California, Berkeley)
Year2011
Volume121
Issue556
PagesF340-F367
Publication date2011-11-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/j.1468-0297.2011.02468.x
OpenAlexW2168853891
LanguageEN
Citations received1
References cited21

We study optimal fee setting decisions by a monopoly online platform connecting advertisers with potential buyers in two environments: a simple model that captures stylised features of advertising on search engines, social networks and advertisement‐supported email; and a richer model that is more relevant for 'directed' search at price comparison sites. While the platform can choose to charge for both impressions and clicks, we show that the platform maximises profits by using clickthrough fees exclusively. Our model offers a rationale for the evolving practice of relying purely on clickthrough fees for revenues in many online advertising markets

Advertising · Business · Economics · Microeconomics · Monopoly · Revenue · Simple (philosophy · Auction Theory and Applications · Computer Science · Consumer Market Behavior and Pricing · Digital Platforms and Economics · Finance

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