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

Many mobile applications (abbrev. apps) reward the users who physically visit some locations tagged as POIs (places-of-interest) by the apps. In this paper, we study the POI-based collaboration between apps and venues (e.g., restaurants and cafes). On the one hand, an app charges a venue and tags the venue as a POI, which attracts users to visit the venue and potentially increases the venue's sales. On the other hand, the venue can invest in the app-related infrastructure (e.g., Wi-Fi networks and smartphone chargers), which enhances the users' experience of using the app. However, the existing POI pricing schemes of the apps (e.g., Pokemon Go and Snapchat) cannot incentivize the venue's infrastructure investment, and hence cannot achieve the most effective app-venue collaboration. We model the interactions among an app, a venue, and users by a three-stage Stackelberg game, and design an optimal two-part pricing scheme for the app. This scheme has a charge-with-subsidy structure: the app first charges the venue for becoming a POI, and then subsidizes the venue every time a user interacts with the POI. Compared with the existing pricing schemes, our two-part pricing better incentivizes the venue's investment, attracts more users to interact with the POI, and achieves a much larger app revenue. We analyze the impacts 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 should collaborate with opposite types of venues.