Common Agency and Coordinated Bids in Sponsored Search Auctions

Download or read book Common Agency and Coordinated Bids in Sponsored Search Auctions written by Francesco Decarolis and published by . This book was released on 2013 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: As auctions are becoming the main mechanism for selling advertisement space on the web, marketing agencies specialized in bidding in online auctions are proliferating. We analyze theoretically how bidding delegation to a common marketing agency can undermine both revenues and efficiency of the generalized second price auction, the format used by Google and Microsoft-Yahoo!. Our characterization allows us to quantify the revenue losses relative to both the case of full competition and the case of agency bidding under an alternative auction format (specifically, the VCG mechanism). We propose a simple algorithm that a search engine can use to reduce efficiency and revenue losses.