A network equilibrium framework for Internet advertising: Models, qualitative analysis, and algorithms

In this paper, we develop a network equilibrium framework for the modeling and analysis of competitive firms engaged in Internet advertising among multiple websites. The model allows for the determination of both the equilibrium online advertising budget as well as the advertising expenditures on the different websites. We then specialize the model to the case of fixed online budgets for the firms. The governing equilibrium conditions of both models are shown to satisfy finite-dimensional variational inequalities. We present qualitative properties of the solution patterns as well as computational procedures that exploit the underlying abstract network structure of these problems. The models and algorithms are illustrated with numerical examples. This paper adds to the growing literature of the application of network-based techniques derived from operations research to the advertising/marketing arena.