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Information Design in Affiliate Marketing

DOI:10.1007/s10458-021-09509-7
Authors:
Sharadhi Alape Suryanaraya at Bar Ilan University
Sharadhi Alape Suryanaraya
David Sarne
David Sarne
David Sarne
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Sarit Kraus at Bar Ilan University
Sarit Kraus
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Abstract and Figures

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.
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Vol.:(0123456789)
Autonomous Agents and Multi-Agent Systems (2021) 35:23
https://doi.org/10.1007/s10458-021-09509-7
1 3
Information Design inAffiliate Marketing
SharadhiAlapeSuryanarayana1 · DavidSarne1· SaritKraus1
Accepted: 21 May 2021 / Published online: 31 May 2021
© Springer Science+Business Media, LLC, part of Springer Nature 2021
Abstract
The recent massive proliferation of affiliate marketing suggests a new e-commerce para-
digm 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 affili-
ates 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 (posi-
tive) 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 tradi-
tional 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.
Keywords Affiliate marketing· Equilibrium· Dynamic pricing· Mechanism design· Gig
economy
1 Introduction
Affiliate marketing is a new e-commerce paradigm in which by promoting other people’s
(or companies’) products or services one can earn a commission (either resulting from a
click or from an actual sale) [33, 42]. The idea is that content producers can monetize their
network of followers by promoting products and services, hence saving manufacturers time
and effort in reaching their target audience. The manufacturers in turn compensate the con-
tent producers by sharing some of the revenue and this has led to many companies nowa-
days offering content producers a financial incentive to promote their product through an
* Sharadhi Alape Suryanarayana
sharadhi.as@gmail.com
David Sarne
david.sarne@biu.ac.il
Sarit Kraus
sarit@cs.biu.ac.il
1 Department ofComputer Science, Bar-Ilan University, RamatGan, Israel
Content courtesy of Springer Nature, terms of use apply. Rights reserved.
... Perhaps it might be applicable in the prepandemic era or in different research context and settings. Nevertheless, marketers should explore other marketing strategy that could further influence consumer behaviour which is useful for the company's profitability and growth such as the role of affiliate marketing, lifestyle marketing or search engine marketing (Suryanarayana et al., 2021;Dwivedi et al., 2017;Devi, 2016;Sathish and Rajamohan, 2012;Dou et al., 2010;Nyagadza, 2020;Angeloni and Rossi, 2021). ...
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