The equivalence of incentive schemes in content platforms: an equilibrium analysis

What the paper says

Purpose For most platforms, a key challenge is to design appropriate incentive mechanisms that effectively motivate relevant participants in an open environment. In this paper, the authors aim to focus on a three-sided content platform involving creators, users and advertisers and investigate the strategic design of such mechanisms. Specifically, this study analyzes and compares three common incentive schemes: content-volume-based, view-volume-based and a hybrid of the previous two. Design/methodology/approach Using a game-theoretic model that captures the interactions among all parties, this study derives closed-form equilibrium solutions for the platform’s optimal incentive fees and advertising prices, as well as for creators’ content-production levels and payoffs. Findings The analysis reveals a striking equivalence among the three schemes: despite their structural differences, they yield identical equilibrium outcomes in content production, user engagement, advertising metrics and platform profit. Moreover, the optimal hybrid incentive fees are simply a convex combination of optimal incentive fees under the two pure schemes, giving managers budgetary flexibility without affecting performance. Originality/value This study contributes to the literature on multisided platforms by demonstrating the strategic substitutability of common incentive structures and by providing a unified framework for understanding platform design when advertising levels and creator competition are endogenous.