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Position Auctions with Consumer Search

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Author Info
Susan Athey
Glenn Ellison

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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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Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15253.

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Date of creation: Aug 2009
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Handle: RePEc:nbr:nberwo:15253

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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

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Glenn Ellison & Sara Fisher Ellison, 2009. "Search, Obfuscation, and Price Elasticities on the Internet," Econometrica, Econometric Society, vol. 77(2), pages 427-452, 03. [Downloadable!] (restricted)
    Other versions:
  2. 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. [Downloadable!] (restricted)
    Other versions:
  3. Yongmin Chen & Chuan He, 2006. "Paid Placement: Advertising and Search on the Internet," Working Papers 06-02, NET Institute, revised Sep 2006. [Downloadable!]
  4. Varian, Hal R., 2007. "Position auctions," International Journal of Industrial Organization, Elsevier, vol. 25(6), pages 1163-1178, December. [Downloadable!] (restricted)
  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. [Downloadable!]
  6. 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. [Downloadable!] (restricted)
  7. 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. [Downloadable!]
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  8. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June. [Downloadable!] (restricted)
  9. Glenn Ellison & Drew Fudenberg & Markus Möbius, 2004. "Competing Auctions," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 30-66, 03. [Downloadable!] (restricted)
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  10. 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. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Zhou, Jidong, 2009. "Prominence and Consumer Search: The Case With Multiple Prominent Firms," MPRA Paper 12554, University Library of Munich, Germany. [Downloadable!]
  2. Mark Armstrong & John Vickers & Jidong Zhou, 2008. "Prominence and Consumer Search," Economics Series Working Papers 379, University of Oxford, Department of Economics. [Downloadable!]
    Other versions:
  3. Zhou, Jidong, 2009. "Ordered Search in Differentiated Markets," MPRA Paper 13397, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  4. Pollock, Rufus, 2008. "Is Google the next Microsoft? Competition, Welfare and Regulation in Internet Search," MPRA Paper 8885, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  5. Kiho Yoon, 2009. "On the strategic use of quality scores in keyword auctions: Full extraction of advertisers' surplus," Discussion Paper Series 0904, Institute of Economic Research, Korea University. [Downloadable!]
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This page was last updated on 2009-11-21.

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