Monetizing digital content with network effects: A mechanism-design approach
Theoretical Economics
2025-07-31 v5
Abstract
We design profit-maximizing mechanisms to sell an excludable and non-rival good with positive and/or negative network effects. Buyers have heterogeneous private values that depend on how many others also consume the good. In optimum, an endogenous number of the highest types consume the good, and we can implement this allocation in dominant strategies. We apply our insights to digital content creation, and we are able to rationalize features seen in monetization schemes in this industry such as voluntary contributions, community subsidies, and exclusivity bids.
Keywords
Cite
@article{arxiv.2408.15196,
title = {Monetizing digital content with network effects: A mechanism-design approach},
author = {Vincent Meisner and Pascal Pillath},
journal= {arXiv preprint arXiv:2408.15196},
year = {2025}
}