Operations and Supply Chain Management Commons^™

The Newsvendor's Optimal Incentive Contracts For Multiple Advertisers, Zhengping Wu, Pascale Crama, Wanshan Zhu

Research Collection Lee Kong Chian School Of Business

We consider a newsvendor who earns a revenue from the sales of her product to end users as well as from multiple advertisers paying to obtain access to those end users. We study the optimal decisions of a price-taking and a price-setting newsvendor when the advertisers have private information about their willingness to pay. We focus on the impact of the number of advertisers on the newsvendor’s optimal decisions. We find that regardless of the number of advertisers, the newsvendor may exclude advertisers with a low willingness to pay and distort the price and inventory from their system-efficient levels to …