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NTU Management Review Vol. 33 No. 2 Aug. 2023

3.1.3 The MCN’s optimization problem
3.1.3 The MCN’s Optimization Problem
Collectively, after determining the advertorial allocation decision , the MCN
Collectively, after determining the advertorial allocation decision x, the MCN
company’s contract design problem is to choose ϕ and ϕ to solve
L and to solve
company’s contract design problem is to choose
H
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= max (1 − )[( )
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(1 − )[( )
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[(1− ) (1 − )(1 − )
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(1 − )[(1− ) (1 − )
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(1 − ) [ (1 − )(1− ) ,
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where the two creators solve their effort exertion problems by solving
= max [( ) −
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and
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= max [( ) (1 − ) − .
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The sequence of events is depicted in Figure 2. First, the MCN company decides
The sequence of events is depicted in Figure 2. First, the MCN company decides
the advertorial allocation proportion for two of the creators, where x is the share for the
the advertorial allocation proportion for two of the creators, where is the share for
high-type creator and 1-x is for the low-type one. Second, the MCN company decides the
percentages of all revenue, including advertisement revenue and advertorial fee, left for
the high-type creator and 1− is for the low-type one. Second, the MCN company
the creators. The revenue percentages left for the high-type and low-type creators are ϕ
decides the percentages of all revenue, including advertisement revenue and advertorial
H
and ϕ , respectively. Third, after the contracts are signed, the two creators determine their
L
fee, left for the creators. The revenue percentages left for the high-type and low-type
effort levels, e and e , independently. The performances of the videos are then observed,
L
H
the advertisement revenue and advertorial fee are then realized, and all players get paid
creators are and , respectively. Third, after the contracts are signed, the two
according to the contracts. �
�
creators determine their effort levels, and , independently. The performances of
A list of notations is provided in Table 2. �
�
the videos are then observed, the advertisement revenue and advertorial fee are then
3.2 The Leagued-MCN Structure (L)
realized, and all players get paid according to the contracts.
Under the leagued-MCN structure, all the settings are similar to the independent-
MCN structure except for the ownership of the MCN company. Instead of an independent
MCN company existing in the market, the MCN company is co-owned by both high-type
and low-type creators. The two creators jointly determine the allocation of the advertorial
and the two effort levels. The industry structure of leagued-MCN is depicted in Figure 3.
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