Analysis of Ad-Supported eBook Sales Model

摘要

With the rapid and continuous increase of eBook market in recent years, retailers areexploring the ad-supported eBook model. A few companies have taken the lead in incorporatingads in their eBook such as Wiwio and Amazon. While the ad-supported eBook increases onlineretailers' revenue, such strategy might discourage consumers because they will experiencedisutility of reading ads in eBooks. Using a game theory model, we explore whether the eBookretailer will be better off to adopt the ad-supported model. We derive the equilibrium prices inboth monopoly and duopoly setting and identify the conditions under which the ad-supportedeBook retailer can generate more revenue. Our results show that the cross-side network effect ofeBook side reduces equilibrium prices and strengthens competition. We also find that eBookconsumers' disutility level plays different roles in ad-supported retailers' pricing strategies indifferent setting.