Optimal Contract and Pricing Decisions for Online Display Advertisement

This paper considers a contract and pricing decision problem in online display advertisements. We model the entire decision process as a Stackelberg game that involves one advertiser and one publisher. As the game leader, the publisher initiates the game by setting cost-per-impression (CPM) under pay-per-view (PPV) pricing scheme or cost-per-click (CPC) under pay-per-click (PPC) pricing scheme, and each player aims at maximizing her own expected revenue. We show the existences of the publisher's unique best response for both pricing schemes and analyze how the optimal decision will change as parameters change.