A Mechanism for On-line Advertisement Placement to Deter Click Fraud

Wei Zhou, Subhajyoti Bandyopadhyay, Hsing K. Cheng, and Praveen Pathak
International Journal of Electronic Commerce,
Volume 13, Number 2, Winter 2008-09, pp. 9.

Abstract: The principal-agent problem of the on-line advertising market is investigated with respect to the publisher, the coordinator, and the advertiser. The publisher-coordinator contract is a double-sided moral hazard problem; the coordinator-advertiser contract is a double moral hazard problem with the agent’s effort observed. These findings are compared to the auction-based model, and the cause and conditions of click fraud under both models are explained. The discussion shows that an efficient market deters click fraud, but an auction-based market is unable to achieve full efficiency.

Key Words and Phrases
: Click fraud, double-sided moral hazard, on-line advertising.