Information Design in Affiliate Marketing

Sharadhi Alape Suryanarayana, David Sarne, Sarit Kraus

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

The recent massive proliferation of affiliate marketing suggests a new e-commerce paradigm which involves sellers, affiliates and the platforms that connect them. In particular, the fact that prospective buyers may become acquainted with the promotion through more than one affiliate to whom they are connected calls for new mechanisms for compensating affiliates for their promotional efforts. In this paper, we study the problem of a platform that needs to decide on the commission to be awarded to affiliates for promoting a given product or service. Our equilibrium-based analysis, which applies to the case where affiliates are a priori homogeneous and self-interested, enables showing that a minor change in the way the platform discloses information to the affiliates results in a tremendous (positive) effect on the platform’s expected profit. In particular, we show that with the revised mechanism the platform can overcome the multi-equilibria problem that arises in the traditional mechanism and obtain a profit which is at least as high as the maximum profit in any of the equilibria that hold in the latter.

Original languageEnglish
Article number23
JournalAutonomous Agents and Multi-Agent Systems
Volume35
Issue number2
DOIs
StatePublished - Oct 2021

Bibliographical note

Publisher Copyright:
© 2021, Springer Science+Business Media, LLC, part of Springer Nature.

Keywords

  • Affiliate marketing
  • Dynamic pricing
  • Equilibrium
  • Gig economy
  • Mechanism design

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