Online advertising channel choice — Posted price vs. auction

Online advertising plays more important role in 21st century. Scholars pay much attention on how to bid in sponsored search auction. While few research have been done on advertisers facing mixed pricing mechanisms and need to compete in product market. Base on game theory, we set advertisers' Ad channel choice model by taking competition in product market into consideration. The comparison of heterogeneous advertisers profit under two kinds of pricing mechanism - auction vs posted price when the advertisers know a certain consumers' search, click behavior pattern and purchase decision rule shows as the cost to provide high quality product reduce, High quality product advertiser prefers auction mechanism, while Low quality product advertiser prefers posted price. When consumers' search cost are decrease, namely, the proportion of consumers who would like purchase after comparison increase, the advertisers prefer posted price mechanism simultaneously.