Likes, Budgets, and Equilibria: Designing Contests for Socially Optimal Advertising
This addresses the challenge for regulators and social network providers to design advertising contests that achieve social welfare, though it is incremental as it builds on existing game-theoretic models.
The paper tackles the problem of firms competing to maximize brand awareness through advertising on social networks, proposing a two-timescale model where best response dynamics converge to a pure strategy Nash equilibrium, and it characterizes contest success functions to make this equilibrium unique and socially optimal, with experiments showing good performance in realistic scenarios.
Firms (businesses, service providers, entertainment organizations, political parties, etc.) advertise on social networks to draw people's attention and improve their awareness of the brands of the firms. In all such cases, the competitive nature of their engagements gives rise to a game where the firms need to decide how to distribute their budget over the agents on a network to maximize their brand's awareness. The firms (players) therefore need to optimize how much budget they should put on the vertices of the network so that the spread improves via direct (via advertisements or free promotional offers) and indirect marketing (words-of-mouth). We propose a two-timescale model of decisions where the communication between the vertices happen in a faster timescale and the strategy update of the firms happen in a slower timescale. We show that under fairly standard conditions, the best response dynamics of the firms converge to a pure strategy Nash equilibrium. However, such equilibria can be away from a socially optimal one. We provide a characterization of the contest success functions and provide examples for the designers of such contests (e.g., regulators, social network providers, etc.) such that the Nash equilibrium becomes unique and social welfare maximizing. Our experiments show that for realistic scenarios, such contest success functions perform fairly well.