Analyzing Social Media on Advertising Markets: A Game Theory Perspective

Abstract

This research explores the application of game theory in analyzing the intricate relationships among advertisers, social media platforms, and users in the advertising markets. By examining the strategic aspects of game theory, the study sheds light on the strategies, equilibria, and outcomes that shape the landscape of social media advertising. This thesis investigates how advertisers strategically compete on social media platforms, considering factors such as targeting, bidding, and adaptation. It also explores the factors influencing user behavior and advertising policies, including user preferences, engagement levels, peer recommendations, platform algorithms, and privacy concerns. Through the analysis of equilibrium outcomes and market structures, it reveals the oligopoly market structure, targeting and personalization strategies, and the dynamics of advertisement auctions and pricing. Last but not least, this thesis provides suggestions for policymakers to take into consideration so that they can make the most advantageous decision appropriately.