Abstract

We analyse the use of options for online advertisement publishers. By providing a discount or rewards to advertisers, publishers can utilize their uncertain service capacity, page-views, more efficiently. We use Generalized Nash Bargaining to study the feasibility of the option contract and solve for an optimal value for the option price. We compare the revenues and benefits from advertisements under the option contract, with those without the options using numerical studies. We also study the impact of pricing and other components in the game on the optimal option price, the publisher’s revenues, and the advertiser’s benefits from the advertisements.