solution

Show how much money the advertiser can save by hiring a click-fraud detective in terms of p_C, n, X, and Z. What is the advertiser’s willingness to pay for the detective services?

b. Suppose there are 500 advertisers with the following attributes: p_C = $5, n = 700, X = 0.2, and Z = 0.8. There are 200 advertisers with the attributes p_C = $9, n = 600, X = 0.3, and Z = 0.8. Finally, there are 300 advertisers with the attributes p_C = $12, n = 100, X = 0.8, and Z = 0.7. Draw the inverse market demand curve for click-fraud detectives. (Hint: The demand curve is a “step” function (see Figure 9.2a).)

c. Suppose the market supply curve for click-fraud detective services is perfectly price elastic with an intercept of $500 on the price axis. What is the consumer surplus to the advertisers?