Market Your Venue with Mobile Applications: Collaboration of Online and Offline Businesses

Manymobile applications (abbrev. apps) reward the users who physically visit somelocations tagged as POIs (places-of-interest) by the apps. In this paper, westudy the POI-based collaboration between apps and venues (e.g., restaurantsand cafes). On the one hand, an app charges a venue and tags the venue as aPOI, which attracts users to visit the venue and potentially increases thevenue’s sales. On the other hand, the venue can invest in the app-relatedinfrastructure (e.g., Wi-Fi networks and smartphone chargers), which enhancesthe users’ experience of using the app. However, the existing POI pricingschemes of the apps (e.g., Pokemon Go and Snapchat) cannot incentivize thevenue’s infrastructure investment, and hence cannot achieve the most effectiveapp-venue collaboration. We model the interactions among an app, a venue, andusers by a three-stage Stackelberg game, and design an optimal two-part pricingscheme for the app. This scheme has a charge-with-subsidy structure: the app first charges thevenue for becoming a POI, and then subsidizes the venue every time a userinteracts with the POI. Compared with the existing pricing schemes, our two-partpricing better incentivizes the venue’s investment, attracts more users tointeract with the POI, and achieves a much larger app revenue. We analyze theimpacts of the app’s and venue’s characteristics on the app’s optimal revenue,and show that the apps with small and large congestion effects shouldcollaborate with opposite types of venues.