%0 Journal Article
%T Selecting and Remunerating Advertising Agencies: A Signaling Theoretical Perspective
%A Jacob Hornik
%J Journal of Service Science and Management
%P 192-220
%@ 1940-9907
%D 2023
%I Scientific Research Publishing
%R 10.4236/jssm.2023.163012
%X Advertising agencies have historically received a
major share of their com<span style=\"font-family:;\" \"=\"\">pensation as </span><span style=\"font-family:;\" \"=\"\">a </span><span style=\"font-family:;\" \"=\"\">commission or on the basis of one or more fee
structures. Howev<span>er, during the last few
years</span></span><span style=\"font-family:;\" \"=\"\">,</span><span style=\"font-family:;\" \"=\"\"> agencies are under heavy pressure to demon</span><span style=\"font-family:;\" \"=\"\">strate their accountability and prove the value of their contribution to
the advertis<span>er, by using some performance</span></span><span style=\"font-family:;\" \"=\"\">-</span><span style=\"font-family:;\" \"=\"\">based compensation. However, there are</span><span style=\"font-family:;\" \"=\"\"> some <span>conflicts between the advertiser and the agency
mainly because of different</span> objectives and risk preferences, which leads
to favor of different courses of action. So far, most studies conducted with </span><span style=\"font-family:;\" \"=\"\">the</span><span style=\"font-family:;\" \"=\"\"> aim of resolving th</span><span style=\"font-family:;\" \"=\"\">ese</span><span style=\"font-family:;\" \"=\"\"> conflicts and reconciling
the interests of both parties have relied on agency theory</span><span style=\"font-family:;\" \"=\"\">,</span><span style=\"font-family:;\" \"=\"\"> but failed to lead to a
stable equilibrium for both parties. In this study</span><span style=\"font-family:;\" \"=\"\">,</span><span style=\"font-family:;\" \"=\"\"> we offer a <span>theoretical
model based on signaling theory, which leads to a stable optimal </span><span>solution for both parties. We critically examine
the motivations and</span><span> conflicts</span> <span>arising in the evolvement of a suitable
remuneration system and the means</span><span> </span>of
resolutions available to both parties for a satisfying contract. Also, we
develop an auction theoretical model for selecting full-service adver<span>tising</span><span> agencies considering the interdependencies among evaluation criteria. Our
findings provide practical guidelines for ad agency selection and compensation.</span></span>
%K Ad Agencies
%K Game Theory
%K Signaling Theory
%K Auction Theory
%K Pay-by-Results
%K Compensation
%U http://www.scirp.org/journal/PaperInformation.aspx?PaperID=124806