Marketing Agencies and Collusive Bidding in Online Ad Auctions

Francesco Decarolis, Maris Goldmanis () and Antonio Penta ()
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Maris Goldmanis: Department of Economics, Royal Holloway, University of London, Egham TW20 0EX, United Kingdom;

Management Science, 2020, vol. 66, issue 10, 4433-4454

Abstract: The transition of the advertising market from traditional media to the internet has induced a proliferation of marketing agencies specialized in bidding in the auctions that are used to sell ad space on the web. We analyze how collusive bidding can emerge from bid delegation to a common marketing agency and how this can undermine the revenues and allocative efficiency of both the generalized second-price auction (GSP, used by Google, Microsoft Bing, and Yahoo!) and the Vickrey–Clarke–Groves (VCG) mechanism (used by Facebook). We find that despite its well-known susceptibility to collusion, the VCG mechanism outperforms the GSP auction in terms of both revenues and efficiency.

Keywords: collusion; digital marketing agencies; Facebook; Google; GSP; internet auctions; online advertising; VCG (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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https://doi.org/10.1287/mnsc.2019.3457 (application/pdf)

Related works:
Working Paper: Marketing Agencies and Collusive Bidding in Online Ad Auctions (2019)
Working Paper: Marketing Agencies and Collusive Bidding in Online Ad Auctions (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:66:y:2020:i:10:p:4433-4454

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