Equilibrium bids in sponsored search auctions: theory and evidence

TY - JOUR

T1 - Equilibrium bids in sponsored search auctions

T2 - theory and evidence

AU - Börgers, Tilman

AU - Cox, Ingemar Johansson

AU - Pesendorfer, Martin

AU - Petricek, Vaclav

PY - 2013/11

Y1 - 2013/11

N2 - 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.

AB - 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.

U2 - 10.1257/mic.5.4.163

DO - 10.1257/mic.5.4.163

M3 - Journal article

SN - 1945-7669

VL - 5

SP - 163

EP - 187

JO - American Economic Journal: Microeconomics

JF - American Economic Journal: Microeconomics

IS - 4

ER -