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Equilibrium bids in sponsored search auctions: theory and evidence

Borgers, Tilman and Cox, Ingemar and 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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Identification Number: 10.1257/mic.5.4.163


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:
Additional Information: © 2013 American Economic Association
Subjects: H Social Sciences > HB Economic Theory
Sets: Collections > Economists Online
Departments > Economics
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Date Deposited: 15 Apr 2013 13:04
Last Modified: 12 Aug 2014 13:43
Projects: RES-000-23-0201, SES 0214222
Funders: Economic and Social Research Council, National Science Foundation

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