Double Marginalization and Misplacement in Online Advertising

37 Pages Posted: 21 Sep 2021 Last revised: 26 Jul 2022

See all articles by Alexander White

Alexander White

Tsinghua University - School of Economics & Management

Kamal Jain

Amazon

Shota Ichihashi

Queen's University

Byung-Cheol Kim

University of Alabama

Multiple version iconThere are 3 versions of this paper

Date Written: July 24, 2022

Abstract

Internet users often surf multiple websites as a bundle to fulfill their needs and "pay" for the content by watching ads. We study how such complementary websites choose advertising policies. Two forces distort the equilibrium away from the industry optimum and the efficient outcome. First, websites place too many ads (double marginalization). Second, given the total advertising volume at equilibrium, websites misallocate ads across themselves (misplacement). Competition in one market segment may eliminate double marginalization but exacerbate misplacement. Introducing micropayments removes misplacement, but the welfare consequences are ambiguous. Policymakers thus need caution in applying the standard remedies to zero-price markets.

Keywords: Platforms, Advertising, Misplacement, Double Marginalization, Competition

JEL Classification: D21, D40, L23, L42, L86

Suggested Citation

White, Alexander and Jain, Kamal and Ichihashi, Shota and Kim, Byung-Cheol, Double Marginalization and Misplacement in Online Advertising (July 24, 2022). Available at SSRN: https://ssrn.com/abstract=3926873 or http://dx.doi.org/10.2139/ssrn.3926873

Alexander White (Contact Author)

Tsinghua University - School of Economics & Management ( email )

Mailbox A-44
Weilun Building
Beijing, 100084
China

HOME PAGE: http://alex-white.net

Kamal Jain

Amazon ( email )

Shota Ichihashi

Queen's University ( email )

99 University Ave
Ontario, Kingston K7L 3N6
Canada

Byung-Cheol Kim

University of Alabama ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States
7708462727 (Phone)
7708462727 (Fax)

HOME PAGE: http://bkim.people.ua.edu/

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