Pricing strategy selection for content platformsconsidering cash subsidies

Abstract

Three pricing strategy models—free, charge, and cash subsidy—are constructed for content platforms in a multilateral market based on the game theory. The optimal pricing strategy for a platform is identified by comparing the parameters under each pricing strategy. The results reveal that ad interference cost and ad marginal revenue affect a platform’s pricing strategy selection and the cash subsidy amount. The cash subsidy strategy is used when both are within a certain range of thresholds; the charge strategy is adopted when the ad interference cost is very high; and the free strategy is adopted in other cases. In addition, under the cash subsidy strategy, the amount of cash subsidy is negatively correlated to ad interference cost and positively related to ad marginal revenue. Under the same conditions, adopting the cash subsidy strategy is better for all stakeholders and social welfare than the other two pricing schemes. Moreover, ad marginal revenue affects some parameters in the cash subsidy strategy and the free strategy in opposite directions.

Keywords

content platform / pricing strategy / choice / charge / free / cash subsidy