Work

Equilibrium Bids in Sponsored Search Auctions: Theory and Evidence

Year: 2013

Type: article

Abstract: This paper presents a game theoretic analysis of the generalized second-price auction that the company Overture operated in 2004 to sell sponsored search listings on search engines. We construct a model that embodies few prior assumptions about parameters, and we present results that indicate that this model has under quite general assumptions a multiplicity of Nash equilibria. We then analyze bid data assuming that advertisers choose Nash equilibrium bids. We offer preliminary conclusions about advertisers' true willingness to bid for sponsored search listings. We find that advertisers' true willingness to bid is multi-dimensional and decreasing in listing position. (JEL D44, L86, M31, M37)

Source: American Economic Journal Microeconomics

DOI: 10.1257/mic.5.4.163

Authors: Tilman Börgers, Ingemar Cox, Martin Pesendorfer, Vaclav Petricek

Institutions: University of Michigan, University College London, London School of Economics and Political Science

Language: English

Topic: Auction Theory and Applications

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

Open Access status: bronze

Funders: National Science Foundation, Economic and Social Research Council

Awards: Identification, Estimation and Computation in Multi-Unit Auctions, G841499813