Two-Sided Beneficial Value-Added Service Investment and Pricing Strategies in Asymmetric/Symmetric Investment Scenarios

Abstract

We explore media platforms’ investment strategies for two-sided beneficial value-added services, which can directly benefit both consumers and advertisers, and ad pricing strategies by using game theory. We consider an asymmetric investment scenario, scenario A, and a symmetric investment scenario, scenario S, and develop game models under each scenario. First, we obtain the equilibrium investments, prices and profits and analyze the influence of the three important parameters—marginal investment costs, positive consumer effects and negative advertising effects, on the equilibrium outcomes in each scenario. Then we compare these equilibrium outcomes between both scenarios. Finally, we conduct numerical simulations to verify the conclusions obtained in both scenarios. We show that in scenario A, the value-added service levels and ad prices of the investment platforms remain constant and then decrease with marginal investment costs. The ad prices and profits of the investment platforms increase (decrease) with positive consumer effects (negative advertising effects). The same change is true for the value-added service levels only under certain conditions. In scenario S, the value-added service levels of the investment platforms change with positive consumer effects or negative advertising effects only when marginal investment costs are high. The ad prices of the platforms always increase with positive consumer effects but increase with negative advertising effects only when marginal costs are low. The profits of the platforms vary monotonically with negative advertising effects, but not necessarily with positive consumer effects. Compared to scenario S, the ad prices of the investment platforms in scenario A are higher, but that is not always true for the value-added service levels.