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Delaying Payment to Deter Online Advertising Fraud

March 10, 2008

In Optimal Deterrence when Judgment-Proof Agents are Paid in Arrears - with an Application to Online Advertising Fraud, I introduce an alternative method of fraud prevention for certain online advertising systems. By delaying payments, a merchant or network differentially harms bad affiliates (who rightly worry they may get caught) without unduly harming good affiliates (who know they'll get paid, and who receive a bonus in compensation for the delay). With a suitable delay, a merchant or network can deter many bad affiliates while retaining the good.

Details on my approach, including initial data on merchants' and networks' current payment terms.