Contract Design in Hierarchical Game for Sponsored Content Service Market

Abstract

With a sponsored content scheme of mobile services, a content provider can encourage end users/subscribers to access its contents, e.g., with an advertisement, by paying part of the data price to the network operator. As a result, the content provider and end users are both actively engaged into the sponsored content ecosystem. As such, a key challenge is how to provide proper sponsorship given the content demand from the users and the service fee charged by the network operator. Furthermore, the information asymmetry between the content provider and users makes the sponsorship problem more challenging. In this paper, we propose a Stackelberg game-based framework to tackle this challenge. In the framework, the network operator, as the leader, determines the data price first, and the content provider as well as users, as the followers, make the decisions on sponsorship and content demand based on the data price, respectively. We model the interaction between the content provider and the users as a contract game in the presence of asymmetric information. In the contract game, the content provider designs a contract that contains its sponsorship strategies toward all types of users. We then derive the necessary and sufficient conditions of feasible contracts and obtain an optimal contract to maximize the profit of the content provider. Taking into account the optimal contract of contract game, we also investigate the optimal pricing of the network operator through backward induction. We prove that the Stackelberg equilibrium is unique under a mild condition and present the numerical results to illustrate some important properties of the equilibrium.