2025/07/30 by Md Mahadi Hasan, Hasan, Md Mahadi
Business, Management and Accounting · Decision Sciences · #Auction Theory and Applications #Consumer Market Behavior and Pricing #Digital Platforms and Economics #FOS: Economics and business #Theoretical Economics (econ.TH)
paper · pdf · doi:10.48550/arxiv.2507.22435
openalex publication_date 2025/07/30 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
I develop a theoretical model to examine how the rise of autonomous AI (artificial intelligence) agents disrupts two-sided digital advertising markets. Through this framework, I demonstrate that users' rational, private decisions to delegate browsing to agents create a negative externality, precipitating declines in ad prices, publisher revenues, and overall market efficiency. The model identifies the conditions under which publisher interventions such as blocking AI agents or imposing tolls may mitigate these effects, although they risk fragmenting access and value. I formalize the resulting inefficiency as an ``attention lemons" problem, where synthetic agent traffic dilutes the quality of attention sold to advertisers, generating adverse selection. To address this, I propose a Pigouvian correction mechanism: a per-delegation fee designed to internalize the externality and restore welfare. The model demonstrates that, for an individual publisher, charging AI agents toll fees for access strictly dominates both the `Blocking' and `Null (inaction)' strategies. Finally, I characterize a critical tipping point beyond which unchecked delegation triggers a collapse of the ad-funded digital market.