Essays on Internet markets and information goods

(cont.) provides explanations as to when and how incorporating them into advertising deals can be profitable. We argue that using these pricing models appropriately can give both the publisher and the advertiser proper incentives to make non-contractible efforts that may improve the effectiveness of advertising campaigns. It also allows the publisher and the advertiser to share the risk caused by uncertainty in the product market. We show that key factors that influence the use of performance-based pricing models are the importance of the publisher's incremental efforts, precision of click-through measurement, uncertainty in the product market, and risk aversion parameters. We also clarify issues that are being debated in the industry, such as how the importance of the advertiser's incremental efforts and existence of non-immediate purchases affect the use of performance-based pricing models. The third essay, "Renting versus Selling Durable Information Goods", studies whether a monopoly producer of a durable information good should sell or rent its good to consumers. We study whether the producer obtains a higher profit under a selling strategy or a renting strategy. Our analysis shows that the conventional wisdom that a durable good monopolist would always prefer renting to selling is no longer valid in the context of durable information goods, because of the existence of "individual depreciation". We find that a renting strategy leads to a higher producer surplus than a selling strategy does, when this individual depreciation parameter is high, i.e., the utility a durable information good provides to consumers decreases relatively ...

Department dc:contributor.department

Sloan School of Management.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2005

Author dc:creator

• Hu, Yu, 1975-

Advisor dc:contributor.advisor

• Erik Brynjolfsson.

• Sloan School of Management.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

en_US

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/28829

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/28829