Dynamic Pricing and Advertising for Web Content Providers

European Journal of Operational Research, Vol. 197, No. 3, pp. 924-944, September 2009

28 Pages Posted: 19 Feb 2008 Last revised: 3 Aug 2014

See all articles by Subodha Kumar

Subodha Kumar

Temple University - Department of Marketing and Supply Chain Management

Suresh Sethi

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: November 1, 2007

Abstract

The accumulated evidence indicates that pure revenue models, such as free-access models and pure subscription fee based models, are not sufficient to support the survival of online information sellers. Hence, hybrid models based on a combination of subscription fees and advertising revenues are replacing the pure revenue models. In response to increasing interest in hybrid models, we study the problem of dynamic pricing of web content on a site where revenue is generated from subscription fee as well as advertisements. We use the optimal control theory to solve the problem and obtain the subscription fee and the advertisement level over time. We first consider the case when the subscription fee can vary over time, but the advertisement level stays the same. Then we extend it by optimizing both the subscription fee and the advertisement level dynamically. We also present several analytical and numerical results that provide important managerial insights.

Keywords: Pricing, revenue, advertising, optimal control theory, web contents

JEL Classification: C61, M3, M37

Suggested Citation

Kumar, Subodha and Sethi, Suresh, Dynamic Pricing and Advertising for Web Content Providers (November 1, 2007). European Journal of Operational Research, Vol. 197, No. 3, pp. 924-944, September 2009. Available at SSRN: https://ssrn.com/abstract=1094943

Subodha Kumar

Temple University - Department of Marketing and Supply Chain Management ( email )

Philadelphia, PA 19122
United States

Suresh Sethi (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W. Campbell Road, SM30
Richardson, TX 75080-3021
United States

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