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Reserve Prices in Internet Advertising Auctions: A Field Experiment

Author

Listed:
  • Ostrovsky, Michael

    (Stanford University)

  • Schwarz, Michael

    (Yahoo! Labs)

Abstract

We present the results of a large field experiment on setting reserve prices in auctions for online advertisements, guided by the theory of optimal auction design suitably adapted to the sponsored search setting. Consistent with the theory, following the introduction of new reserve prices revenues in these auctions have increased substantially.

Suggested Citation

  • Ostrovsky, Michael & Schwarz, Michael, 2009. "Reserve Prices in Internet Advertising Auctions: A Field Experiment," Research Papers 2054, Stanford University, Graduate School of Business.
  • Handle: RePEc:ecl:stabus:2054
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    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP2054.pdf
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    References listed on IDEAS

    as
    1. Paarsch, Harry J., 1997. "Deriving an estimate of the optimal reserve price: An application to British Columbian timber sales," Journal of Econometrics, Elsevier, vol. 78(2), pages 333-357, June.
    2. 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.
    3. Mark Armstrong, 2000. "Optimal Multi-Object Auctions," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 455-481.
    4. Christopher Avery & Terrence Hendershott, 2000. "Bundling and Optimal Auctions of Multiple Products," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 483-497.
    5. Philip A. Haile & Elie Tamer, 2003. "Inference with an Incomplete Model of English Auctions," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 1-51, February.
    6. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-1257, November.
    7. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
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    Citations

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    Cited by:

    1. J. Levin & L. Einav., 2012. "Empirical Industrial Organization: A Progress Report," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
    2. Christopher T. Conlon & Julie Holland Mortimer, 2010. "Effects of Product Availability: Experimental Evidence," NBER Working Papers 16506, National Bureau of Economic Research, Inc.
    3. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2011. "Field Experiments with Firms," Journal of Economic Perspectives, American Economic Association, vol. 25(3), pages 63-82, Summer.
    4. Jonathan Levin, 2011. "The Economics of Internet Markets," Discussion Papers 10-018, Stanford Institute for Economic Policy Research.
    5. Syngjoo Choi & Lars Nesheim & Imran Rasul, 2010. "Reserve price effects in auctions: estimates from multiple RD designs," CeMMAP working papers CWP30/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    6. Ali Hortaçsu & Eric R. Nielsen, 2010. "Commentary--Do Bids Equal Values on eBay?," Marketing Science, INFORMS, vol. 29(6), pages 994-997, 11-12.
    7. L. Elisa Celis & Gregory Lewis & Markus Mobius & Hamid Nazerzadeh, 2014. "Buy-It-Now or Take-a-Chance: Price Discrimination Through Randomized Auctions," Management Science, INFORMS, vol. 60(12), pages 2927-2948, December.
    8. Cheng, Harrison, 2015. "Participation and exclusion in auctions," Economics Letters, Elsevier, vol. 129(C), pages 77-80.
    9. Christopher T. Conlon & Julie Holland Mortimer, 2013. "Demand Estimation under Incomplete Product Availability," American Economic Journal: Microeconomics, American Economic Association, vol. 5(4), pages 1-30, November.
    10. L. Elisa Celis & Gregory Lewis & Markus Mobius & Hamid Nazerzadeh, 2011. "Buy-it-now or Take-a-chance: A New Pricing Mechanism for Online Advertising," Working Papers 11-21, NET Institute, revised Nov 2011.
    11. Смирнов А.С., 2015. "Рынки Контекстной Рекламы: Подходы И Теоретические Модели," Журнал Экономика и математические методы (ЭММ), Центральный Экономико-Математический Институт (ЦЭМИ), vol. 51(4), pages 14-24, октябрь.
    12. Che, Yeon-Koo & Choi, Syngjoo & Kim, Jinwoo, 2017. "An experimental study of sponsored-search auctions," Games and Economic Behavior, Elsevier, vol. 102(C), pages 20-43.
    13. Hummel, Patrick, 2016. "Position auctions with dynamic resizing," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 38-46.
    14. Syngjoo Choi & Lars Nesheim & Imran Rasul, 2016. "Reserve Price Effects In Auctions: Estimates From Multiple Regression-Discontinuity Designs," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 294-314, January.

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