Ads in Conversations

Martino Banchio, Aranyak Mehta and Andres Perlroth

Papers from arXiv.org

Abstract: We study the optimal placement of advertisements for interactive platforms like conversational AI assistants. Importantly, conversations add a feature absent in canonical search markets -- time. The evolution of a conversation is informative about ad qualities, thus a platform could delay ad delivery to improve selection. However, delay endogenously shapes the supply of quality ads, possibly affecting revenue. We characterize the equilibria of first- and second-price auctions where the platform can commit to the auction format but not to its timing. We document sharp differences in the mechanisms' outcomes: first-price auctions are efficient but delay ad delivery, while second-price auctions avoid delay but allocate inefficiently. Revenue may be arbitrarily larger in a second-price auction than in a first-price auction. Optimal reserve prices alleviate these differences but flip the revenue ordering.

Date: 2024-03, Revised 2025-02
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2403.11022 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2403.11022

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().