Monday, March 23, 2020

By: Xintong Han (Concordia University, Department of Economics, 1455 Boulevard de Maisonneuve O, Montreal, QC H3G 1M8, Canada.); Pu Zhao (Boston University, Questrom School of Business, 595 Commonwealth Avenue, Boston, MA 02215, USA.)
Abstract: In this paper, we use unique data from a popular Chinese content provision platform to examine three issues: first, content providers'™ pricing strategies when each follower needs to pay an annual fee for access to content; second, content providers' trade-offs between traffic and referral marketing expenses; and third, the effect of a platform policy on the welfare of content providers and their followers. We use a structural model for a content provider's pricing and referral marketing decisions. The model estimates highlight the link between the referral effectiveness and potential revenue loss. Our counterfactual analysis shows vast difference in communities reactions towards increased platform commissions and potential homogeneity of content provision as well as huge demand loss beyond certain commission thresholds.

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