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

It is shown that each of the two effort levels is increasing in the revenue sharing
percentage ϕ , the creator’s ability β , the per-view payment γ provided by the sharing
i
i
platform, the amount of the advertorial fee A, and the guaranteed proportion of the
4.2 MCN Company’s Contract Design under Structure I
advertorial fee. In other words, the MCN company may incentivize a creator to work
Second, by predicting how the revenue sharing percentages and advertorial
harder by allocating more advertorial fees to her/him or leaving a larger share of total
revenue to her/him.
allocation proportion may affect the creators’ effort levels, the MCN company

maximizes its expected profit by determining the revenue sharing percentages as
4.2 MCN Company’s Contract Design under Structure I
Second, by predicting how the revenue sharing percentages and advertorial
functions of the advertorial allocation proportion. Note that as the two creators’ success
allocation proportion may affect the creators’ effort levels, the MCN company maximizes
or not jointly affect the MCN company’s profit, the two revenue sharing percentages
its expected profit by determining the revenue sharing percentages as functions of the
advertorial allocation proportion. Note that as the two creators’ success or not jointly affect
must be determined simultaneously. By characterizing a necessary and sufficient
the MCN company’s profit, the two revenue sharing percentages must be determined
condition for the profit function to be jointly concave, we derive the optimal revenue
simultaneously. By characterizing a necessary and sufficient condition for the profit
I
function to be jointly concave, we derive the optimal revenue sharing percentages and
sharing percentages and in closed forms.
ϕ
�
�
H
I
in closed forms. � �
ϕ
L
Proposition 2: The optimal revenue percentages left for the two creators are
Proposition 2. The optimal revenue percentages left for the two creators are
�
�
= �� � � and = �� � � , (2) (2)
�
�
�
�
�
�
�
� �
� �
(�� �� � � )(����) � (�� �� � � )(��(���)�)
� �
� �
I
where q and q are defined in Assumption 1. Moreover, we have increases in β ,
�
ϕ
where q H and q are defined in Assumption 1. Moreover, we have ϕ increases in
H
H
� L � �
I
and increases in β .
ϕ
L
L
β , and ϕ increases in β .
�
� � �
It is demonstrated that when a creator’s ability β is improved, the revenue sharing
i
percentage left for her/him will also increase. This is because the creator’s effort level
I
ϕ
i
is affected by her/his ability and the revenue sharing percentage in a multiplicative form,
It is demonstrated that when a creator’s ability is improved, the revenue
�
and thus increasing the revenue sharing percentage is more effective when the creator has
sharing percentage left for her/him will also increase. This is because the creator’s
�
a higher ability. �
effort level is affected by her/his ability and the revenue sharing percentage in a
It should also be noted that Proposition 2 is based on the condition β β A < 2k
H
L
(cf. Assumption 1). If this condition does not hold, i.e., the cost of effort exertion k is
multiplicative form, and thus increasing the revenue sharing percentage is more
too small, the MCN will find it optimal to induce the creators to exert an infinitely large
effective when the creator has a higher ability.
amount of efforts. As this is not realistic in practice, we impose a technical assumption to
eliminate this possibility.
It should also be noted that Proposition 2 is based on the condition
� �
(cf. Assumption 1). If this condition does not hold, i.e., the cost of effort exertion is
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too small, the MCN will find it optimal to induce the creators to exert an infinitely large
18