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Equilibrium bids in sponsored search auctions: theory and evidence

Borgers, Tilman, Cox, Ingemar, Pesendorfer, Martin and Petricek, Vaclav (2013) Equilibrium bids in sponsored search auctions: theory and evidence. American Economic Journal: Microeconomics, 5 (4). pp. 163-187. ISSN 1945-7669

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Abstract

This paper presents a game theoretic analysis of the generalized second-price auction that the company Overture operated in 2004 to sell sponsored search listings on search engines. We construct a model that embodies few prior assumptions about parameters, and we present results that indicate that this model has under quite general assumptions a multiplicity of Nash equilibria. We then analyze bid data assuming that advertisers choose Nash equilibrium bids. We offer preliminary conclusions about advertisers' true willingness to bid for sponsored search listings. We find that advertisers' true willingness to bid is multi-dimensional and decreasing in listing position

Item Type: Article
Official URL: http://www.aeaweb.org/aej-micro/index.php
Additional Information: © 2013 American Economic Association
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: D - Microeconomics > D4 - Market Structure and Pricing > D44 - Auctions
L - Industrial Organization > L8 - Industry Studies: Services > L86 - Information and Internet Services; Computer Software
M - Business Administration and Business Economics; Marketing; Accounting > M3 - Marketing and Advertising > M31 - Marketing
M - Business Administration and Business Economics; Marketing; Accounting > M3 - Marketing and Advertising > M37 - Advertising
Sets: Collections > Economists Online
Departments > Economics
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 15 Apr 2013 13:04
URL: http://eprints.lse.ac.uk/46841/

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