Nonparametric Estimation of Sponsored Search Auctions and Impacts of AD Quality on Search Revenue

Dongwoo Kim and Pallavi Pal

No 10312, CESifo Working Paper Series from CESifo

Abstract: This paper presents an empirical model of sponsored search auctions in which advertisers are ranked by bid and ad quality. We introduce a new nonparametric estimator for the advertiser’s ad value and its distribution under the ‘incomplete information’ assumption. The ad value is characterized by a tractable analytical solution given observed auction parameters. Using Yahoo! search auction data, we estimate value distributions and study the bidding behavior across product categories. We find that advertisers shade their bids more when facing less competition. We also conduct counterfactual analysis to evaluate the impact of score squashing (ad quality raised to power θ

Keywords: sponsored search links; generalized second price auction; incomplete information; nonparametric estimation; bid shading; score quashing (search for similar items in EconPapers)
JEL-codes: C57 D44 L86 M37 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-com and nep-reg
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https://www.cesifo.org/DocDL/cesifo1_wp10312.pdf (application/pdf)

Related works:
Working Paper: Nonparametric estimation of sponsored search auctions and impact of Ad quality on search revenue (2024)
Working Paper: Nonparametric estimation of sponsored search auctions and impacts of ad quality on search revenue (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10312

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