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Optimal quality scores in sponsored search auctions: Full extraction of advertisers' surplus

  • Kiho Yoon

    ()

    (Department of Economics, Korea University, Seoul, South Korea)

This paper shows that the quality scores in sponsored search auctions can be optimally chosen to extract all the advertisers' surplus. The reason for the full extraction result is that the quality scores may effectively set all the bidders' valuations equal to the highest valuation, which induces intense bidding competition.

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File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w0904.pdf
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Paper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number 0904.

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Length: 19 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:iek:wpaper:0904
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  1. Varian, Hal R., 2007. "Position auctions," International Journal of Industrial Organization, Elsevier, vol. 25(6), pages 1163-1178, December.
  2. Evans David S., 2008. "The Economics of the Online Advertising Industry," Review of Network Economics, De Gruyter, vol. 7(3), pages 1-33, September.
  3. David S. Evans, 2009. "The Online Advertising Industry: Economics, Evolution, and Privacy," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 37-60, Summer.
  4. 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.
  5. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November.
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