Common Agency and Coordinated Bids in Sponsored Search Auctions

Francesco Decarolis, Maris Goldmanis () and Antonio Penta ()
Additional contact information
Maris Goldmanis: Department of Economics, Royal Holloway, University of London

No 13-19, Working Papers from NET Institute

Abstract: 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.

Keywords: Online Advertising; Internet Auctions; Common Agency (search for similar items in EconPapers)
JEL-codes: C71 D44 L41 L81 M37 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2013-09
New Economics Papers: this item is included in nep-com, nep-gth, nep-ict, nep-mic and nep-mkt
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http://www.netinst.org/Decarolis_Goldmanis_13-19.pdf (application/pdf)
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Related works:
Working Paper: Common Agency and Coordinated Bids in Sponsored Search Auctions (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:net:wpaper:1319

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