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Pricing in position auctions and online advertising

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  • M. Yenmez

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Abstract

Can search engines increase revenues by changing their position auctions? In this paper, I analyze position auctions with general pricing rules to answer this question. In these auctions, there are several items that are commonly ranked by bidders with unit demand. I show that revenues remain the same for position auctions with regular pricing rules where the price for an item depends on the bids of agents who win lower-ranked items. In addition, all of the bidders have the same ex post payoffs. I also show that regularity is a necessary condition to get ex post payoff equivalence. Copyright Springer-Verlag Berlin Heidelberg 2014

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File URL: http://hdl.handle.net/10.1007/s00199-013-0748-0
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 55 (2014)
Issue (Month): 1 (January)
Pages: 243-256

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Handle: RePEc:spr:joecth:v:55:y:2014:i:1:p:243-256

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Related research

Keywords: Position auctions; Online advertising; Multidimensional types; Ex post payoff equivalence; C71; C78;

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References

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  1. Benjamin Edelman & Michael Schwarz, 2010. "Optimal Auction Design and Equilibrium Selection in Sponsored Search Auctions," Harvard Business School Working Papers 10-054, Harvard Business School.
  2. Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2005. "Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords," NBER Working Papers 11765, National Bureau of Economic Research, Inc.
  3. Gian Albano & Fabrizio Germano & Stefano Lovo, 2006. "Ascending auctions for multiple objects: the case for the Japanese design," Economic Theory, Springer, vol. 28(2), pages 331-355, 06.
  4. Lawrence Ausubel & Peter Cramton, 2004. "Vickrey auctions with reserve pricing," Economic Theory, Springer, vol. 23(3), pages 493-505, March.
  5. Benjamin Edelman & Michael Schwarz, 2010. "Optimal Auction Design and Equilibrium Selection in Sponsored Search Auctions," American Economic Review, American Economic Association, vol. 100(2), pages 597-602, May.
  6. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, September.
  7. Robert Wilson, 1998. "Sequential equilibria of asymmetric ascending auctions: The case of log-normal distributions," Economic Theory, Springer, vol. 12(2), pages 433-440.
  8. Sandro Brusco & Giuseppe Lopomo, 2009. "Simultaneous ascending auctions with complementarities and known budget constraints," Economic Theory, Springer, vol. 38(1), pages 105-124, January.
  9. Hafalir, Isa E. & Ravi, R. & Sayedi, Amin, 2012. "A near Pareto optimal auction with budget constraints," Games and Economic Behavior, Elsevier, vol. 74(2), pages 699-708.
  10. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
  11. Varian, Hal R., 2007. "Position auctions," International Journal of Industrial Organization, Elsevier, vol. 25(6), pages 1163-1178, December.
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