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Abstract

This paper examines a model in which advertisers bid for "sponsored-link" positions on a search engine. The value advertisers derive from each position is endogenized as coming from sales to a population of consumers who make rational inferences about firm qualities and search optimally. Consumer search strategies, equilibrium bidding, and the welfare benefits of position auctions are analyzed. Implications for reserve prices and a number of other auction design questions are discussed.

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File URL: http://kuznets.fas.harvard.edu/~athey/position.pdf
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Bibliographic Info

Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 122247000000001633.

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Date of creation: 31 Oct 2007
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Handle: RePEc:cla:levrem:122247000000001633

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Web page: http://www.dklevine.com/

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Find related papers by JEL classification:

• D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
• L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
• M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising

This paper has been announced in the following NEP Reports:

• NEP-ALL-2007-11-10 (All new papers)

References

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1. Lawrence M. Ausubel & Peter Cramton, 2004. "Auctioning Many Divisible Goods," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 480-493, 04/05.
   
   • Lawrence M. Ausubel & Peter Cramton, 2004. "Auctioning Many Divisible Goods," Papers of Peter Cramton 04jeea, University of Maryland, Department of Economics - Peter Cramton, revised 2004.
2. Varian, Hal R., 2007. "Position auctions," International Journal of Industrial Organization, Elsevier, vol. 25(6), pages 1163-1178, December.
3. Börgers, Tilman & Cox, Ingemar & Pesendorfer, Martin & Petricek, Vaclav, 2008. "Equilibrium Bids in Sponsored Search Auctions: Theory and Evidence," MPRA Paper 29125, University Library of Munich, Germany.
4. Glenn Ellison & Sara Fisher Ellison, 2004. "Search, Obfuscation, and Price Elasticities on the Internet," NBER Working Papers 10570, National Bureau of Economic Research, Inc.
   
   • Glenn Ellison & Sara Fisher Ellison, 2009. "Search, Obfuscation, and Price Elasticities on the Internet," Econometrica, Econometric Society, vol. 77(2), pages 427-452, 03.
5. Emir Kamenica, 2008. "Contextual Inference in Markets: On the Informational Content of Product Lines," American Economic Review, American Economic Association, vol. 98(5), pages 2127-49, December.
6. Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2007. "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords," American Economic Review, American Economic Association, vol. 97(1), pages 242-259, March.
   
   • 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.
7. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
8. Peter Cramton & Yoav Shoham & Richard Steinberg, 2007. "An Overview of Combinatorial Auctions," Papers of Peter Cramton 07oca, University of Maryland, Department of Economics - Peter Cramton, revised 2007.
9. Glenn Ellison & Drew Fudenberg & Markus Mobius, 2010. "Competing Auctions," Levine's Working Paper Archive 506439000000000092, David K. Levine.
   
   • Glenn Ellison & Drew Fudenberg & Markus Möbius, 2004. "Competing Auctions," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 30-66, 03.
   • Glenn Allison & Drew Fudenberg, 2002. "Competing Auctions," Harvard Institute of Economic Research Working Papers 1960, Harvard - Institute of Economic Research.
   • Mobius, Markus & Fudenberg, Drew & Ellison, Glenn, 2004. "Competing Auctions," Scholarly Articles 3043414, Harvard University Department of Economics.
   • Ellison, Glenn & Fudenberg, Drew & Mobius, Markus, 2010. "Competing Auctions," Staff General Research Papers 32106, Iowa State University, Department of Economics.
10. Glenn Ellison & Alexander Wolitzky, 2009. "A Search Cost Model of Obfuscation," NBER Working Papers 15237, National Bureau of Economic Research, Inc.
11. Demange, Gabrielle & Gale, David & Sotomayor, Marilda, 1986. "Multi-Item Auctions," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 863-72, August.
12. Chris M. Wilson, 2008. "Ordered Search and Equilibrium Obfuscation," Economics Series Working Papers 401, University of Oxford, Department of Economics.
    
    • Wilson, Chris M., 2010. "Ordered search and equilibrium obfuscation," International Journal of Industrial Organization, Elsevier, vol. 28(5), pages 496-506, September.

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Citations

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Cited by:

1. Berman, Ron & Katona, Zsolt, 2010. "The Role of Search Engine Optimization in Search Rankings," MPRA Paper 20129, University Library of Munich, Germany.
2. Mark Armstrong & John Vickers & Jidong Zhou, 2008. "Prominence and Consumer Search," Economics Series Working Papers 379, University of Oxford, Department of Economics.
   
   • Mark Armstrong & John Vickers & Jidong Zhou, 2009. "Prominence and consumer search," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 209-233.
3. Zhou, Jidong, 2009. "Ordered Search in Differentiated Markets," MPRA Paper 13397, University Library of Munich, Germany.
   
   • Zhou, Jidong, 2011. "Ordered search in differentiated markets," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 253-262, March.
   • Jidong Zhou, 2009. "Ordered Search in Differentiated Markets," EERI Research Paper Series EERI_RP_2009_28, Economics and Econometrics Research Institute (EERI), Brussels.
4. Pollock, Rufus, 2008. "Is Google the next Microsoft? Competition, Welfare and Regulation in Internet Search," MPRA Paper 8885, University Library of Munich, Germany.
   
   • Pollock, R., 2009. "Is Google the next Microsoft? Competition, Welfare and Regulation in Internet Search," Cambridge Working Papers in Economics 0921, Faculty of Economics, University of Cambridge.
5. Alexandre de Cornière, 2013. "Search Advertising," Economics Series Working Papers 649, University of Oxford, Department of Economics.
6. Alexandre de Cornière & Romain De Nijs, 2013. "Online Advertising and Privacy," Economics Series Working Papers 650, University of Oxford, Department of Economics.
7. Zhou, Jidong, 2009. "Prominence and Consumer Search: The Case With Multiple Prominent Firms," MPRA Paper 12554, University Library of Munich, Germany.
8. Alexandre de Cornière & Greg Taylor, 2013. "Integration and Search Engine Bias," Economics Series Working Papers 651, University of Oxford, Department of Economics.
9. Nicolás Figueroa & Vasiliki Skreta, 2011. "Optimal allocation mechanisms with single-dimensional private information," Review of Economic Design, Springer, vol. 15(3), pages 213-243, September.

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