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Auctions for online ad space among advertisers sensitive to both views and clicks

Author

Listed:
  • Patrick Maillé

    (IMT Atlantique)

  • Bruno Tuffin

    (Inria Rennes Bretagne Atlantique)

Abstract

Advertisement in dedicated webpage spaces or in search engines sponsored slots is usually sold using auctions, with a payment rule that is either per impression or per click. But advertisers can be both sensitive to being viewed (brand awareness effect) and being clicked (conversion into sales). In this paper, we generalize the auction mechanism by including both pricing components: the advertisers are charged when their ad is displayed, and pay an additional price if the ad is clicked. Applying the results for Vickrey–Clarke–Groves auctions, we show how to compute payments to ensure incentive compatibility from advertisers as well as maximize the total value extracted from the advertisement slot(s). We provide tight upper bounds for the loss of efficiency due to applying only pay-per-click (or pay-per-view) pricing instead of our scheme. Those bounds depend on the joint distribution of advertisement visibility and population likelihood to click on ads, and can help identify situations where our mechanism yields significant improvements. We also describe how the commonly used generalized second price auction can be extended to this context.

Suggested Citation

  • Patrick Maillé & Bruno Tuffin, 2018. "Auctions for online ad space among advertisers sensitive to both views and clicks," Electronic Commerce Research, Springer, vol. 18(3), pages 485-506, September.
    • Handle: RePEc:spr:elcore:v:18:y:2018:i:3:d:10.1007_s10660-017-9267-6
    DOI: 10.1007/s10660-017-9267-6
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    References listed on IDEAS

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    1. Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2007. "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords," American Economic Review, American Economic Association, vol. 97(1), pages 242-259, March.
    2. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    3. Maillé,Patrick & Tuffin,Bruno, 2014. "Telecommunication Network Economics," Cambridge Books, Cambridge University Press, number 9781107032750, January.
    4. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 3-22, Summer.
    5. Edward Clarke, 1971. "Multipart pricing of public goods," Public Choice, Springer, vol. 11(1), pages 17-33, September.
    6. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
    7. Dobzinski, Shahar & Lavi, Ron & Nisan, Noam, 2012. "Multi-unit auctions with budget limits," Games and Economic Behavior, Elsevier, vol. 74(2), pages 486-503.
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    Cited by:

    1. Satish Kumar & Weng Marc Lim & Nitesh Pandey & J. Christopher Westland, 2021. "20 years of Electronic Commerce Research," Electronic Commerce Research, Springer, vol. 21(1), pages 1-40, March.

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