<p>I am working on schemas how advertisement space is sold to the ad agencies, ad networks and individual customers. There are lot of questions involved how to design the business agreement. E.g. one can agree about predefined budget and minimum rating level. In other case one can agree about predefined rating level and free floating budget to achieve. In the third case one can pack ad space and sell it in packages, maybe using some kind of auction.</p>

<p>The question is - is there science behind decision what type of agreement, what kind of agreement conditions the company should choose and present to the customer? What arguments are used in such decisions? One can say, that the key argument is optimization of profit, but how one can decide that scheme 1 bring greater profit thatn scheme 2? And profit is not the sole argument, because customer can decide not to agree with some kind of schema. Then negotiation process starts (it may be even automatic) and there should be found some common ground - e.g. maximal utilisation of resources, there should be compromise between the possibly contradictory goals of maximizing the profits of each company.</p>

<p>So - is there such kind of science as design of business agreements, design of sale conditions?</p>

<p>I have heard about mechanism design and auction design, maybe there is agreement design as well?</p>

<p>Thanks of any suggestions! I am technical person, but sometimes I feel that I should know the business side as well. And there should be "first principles", some optimization criteria that can form the basis for business agreements, proposals and negotiations.</p>

<p>Added: I have heard about contract theory - maybe that is the direction where I should look? Maybe my question is about unexplored area?</p>

CC BY-SA 3.0
2015-10-01T19:51:05.250Z
Have you perhaps thought about "costly state-verification" models for investors thinking of investing in a good (say advertising space, or a contract). Where the parties try to find an optimal contractual obligation. Contract theory may also be a good broad place to look.
Kitsune Cavalry
CC BY-SA 3.0
2015-10-07T19:12:42.400Z
I am reading now about optimal contract design for advertising and so far all the articles suggest some kind of auction. But I doubt that each contracting process in real life leads to some kind of auction, this is unrealistic setting. There should be theory that investigates supply and demand and provides criteria how to propose the best possible contract scheme without auction, ordinary contract for use with multiple business partners.
TomR
<microeconomics><mechanism-design>
Business agreement design - is there science behind this?
TomR
# Business agreement design - is there science behind this?

(Asked by: username_0 on 2015-09-27)

I am working on schemas how advertisement space is sold to the ad agencies, ad networks and individual customers. There are lot of questions involved how to design the business agreement. E.g. one can agree about predefined budget and minimum rating level. In other case one can agree about predefined rating level and free floating budget to achieve. In the third case one can pack ad space and sell it in packages, maybe using some kind of auction.

The question is - is there science behind decision what type of agreement, what kind of agreement conditions the company should choose and present to the customer? What arguments are used in such decisions? One can say, that the key argument is optimization of profit, but how one can decide that scheme 1 bring greater profit thatn scheme 2? And profit is not the sole argument, because customer can decide not to agree with some kind of schema. Then negotiation process starts (it may be even automatic) and there should be found some common ground - e.g. maximal utilisation of resources, there should be compromise between the possibly contradictory goals of maximizing the profits of each company.

So - is there such kind of science as design of business agreements, design of sale conditions?

I have heard about mechanism design and auction design, maybe there is agreement design as well?

Thanks of any suggestions! I am technical person, but sometimes I feel that I should know the business side as well. And there should be "first principles", some optimization criteria that can form the basis for business agreements, proposals and negotiations.

Added: I have heard about contract theory - maybe that is the direction where I should look? Maybe my question is about unexplored area?

**Tags:** microeconomics, mechanism-design

> **Comments:**
> **username_1**: Have you perhaps thought about "costly state-verification" models for investors thinking of investing in a good (say advertising space, or a contract). Where the parties try to find an optimal contractual obligation. Contract theory may also be a good broad place to look.  
> **username_0**: I am reading now about optimal contract design for advertising and so far all the articles suggest some kind of auction. But I doubt that each contracting process in real life leads to some kind of auction, this is unrealistic setting. There should be theory that investigates supply and demand and provides criteria how to propose the best possible contract scheme without auction, ordinary contract for use with multiple business partners.  

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## 0 answers

