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Common Agency and Coordinated Bids in Sponsored Search Auctions

Author

Listed:
  • Maris Goldmanis

    (Royal Holloway, University of London)

  • Antonio Penta

    (University of Wisconsin, Madison)

  • Francesco Decarolis

    (University of Wisconsin Madison)

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Maris Goldmanis & Antonio Penta & Francesco Decarolis, 2012. "Common Agency and Coordinated Bids in Sponsored Search Auctions," 2012 Meeting Papers 106, Society for Economic Dynamics.
    • Handle: RePEc:red:sed012:106
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    References listed on IDEAS

    as
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    2. Francesco Decarolis, 2009. "When the highest bidder loses the auction: theory and evidence from public procurement," Temi di discussione (Economic working papers) 717, Bank of Italy, Economic Research and International Relations Area.
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    Cited by:

    1. Francesco Decarolis & Maris Goldmanis & Antonio Penta, 2020. "Marketing Agencies and Collusive Bidding in Online Ad Auctions," Management Science, INFORMS, vol. 66(10), pages 4433-4454, October.
    2. Elena Krasnokutskaya & Christian Terwiesch & Lucia Tiererova, 2018. "Trading across Borders in Online Auctions," American Economic Journal: Microeconomics, American Economic Association, vol. 10(4), pages 27-66, November.

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    More about this item

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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