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Abstract:
Keyword auctions are another multi-billion dollar application of auctions after the celebrated eBay-like business-to-consumer auctions in electronic commerce. Inevitably, keyword auctions have recently gained attention among researchers. Questions regarding what (is keyword auction), why (we should use keyword auctions), and how (to design keyword auctions), have been raised. While some of these issues has become clearer over time, many are still open. The purpose of this paper is to summarize the current efforts to address these questions, focusing mainly on the third, that is, how to design effective keyword auctions. We also point out several issues for future research.

keyword auctions, google, yahoo, online advertising

Abstract:
This paper discusses a class of auctions, weighted unit-price auctions (WUPAs), which capture key features of keyword auctions, a novel mechanism behind the multi-billion-dollar keyword advertising industry. We analyze the equilibrium bidding strategy in the WUPA class and study its two main design parameters - weighting factors and minimum bids - both of which make use of the auctioneer's ex-ante information on bidders' ability to generate outcomes. Our results indicate equilibrium bidding functions in WUPAs may have kinks and jumps. WUPAs can be efficient when an auctioneer weights unit-price bids by bidders' expected yield and imposes the same minimum score (but not the same minimum bid-price) across all bidders. Optimally weighted WUPAs can generate more revenue than generalized first-price auctions, and optimal minimum bids generally differ from those prescribed in the mechanism design literature.

keyword advertising, weighted unit-price auctions, ex-ante information, score rule, Google and Yahoo

Abstract:
Current knowledge management (KM) technologies and strategies advocate two different approaches: knowledge codification and knowledge sharing networks. However, the extant literature has paid limited attention to the interaction between them. This research draws upon the literature on formal modeling of networks to examine the interaction between knowledge codification and knowledge sharing networks. The analysis suggests that an increase in codification may damage existing network-sharing ties. Anticipating that, individuals may hoard their knowledge to protect their network ties, even when there are nontrivial rewards for codification. We find that despite the aforementioned tension between the codification and the network approach, a firm may still benefit from combining the two approaches. Specifically, when the future sharing potential between knowledge workers is high, a combination of the two approaches may outperform a codification-only or a network-only approach as the codification reward causes fewer network ties to break down and the benefit from increased codification can offset the loss of some network ties. However, when the future sharing potential is low an increase in codification reward can quickly break down the whole network, thus firms may be better off by pursuing a codification-only or a network-only strategy.

Knowledge Management, Codification, Knowledge Sharing Network, Sharing Potential

Abstract:
A consumer contest is a sales promotion technique that requires participants to apply certain skills as they compete for prizes or awards. This article is the first to employ a game-theoretical approach to investigate consumer contest design issues, including prize structure, segmentation, and handicapping. First, the authors find that both skill distribution and the number of contestants play an important role in determining the optimal prize structure in consumer contests. Specifically, if the skill distribution has the increasing hazard-rate property, it is optimal for a marketer to use a winner-take-all design. In large contests, for the winner-take-all approach to be optimal, it suffices to have the increasing hazard-rate property only at the high end of the skill distribution. Second, increasing contest size is beneficial to the marketer. Third, a less dispersive skill distribution leads to higher consumption by consumers at all skill levels and thus is beneficial to the marketer. The marketer may achieve less dispersive skill distributions by (1) segmenting or screening contestants according to their skill levels and (2) adopting a performance evaluation scheme that handicaps high-skilled contestants.

consumer contests, prize structure, segmentation, handicapping, entry fee

Abstract:
Keyword advertising, or "sponsored links" that appear alongside online search results or other online content, has grown into a multibillion-dollar market. Providers of keyword advertising, such as Google and Yahoo!, profit by auctioning keywords to advertisers. One issue of increasing importance for advertising providers is the "share structure" problem; that is, out of the total available resources for each keyword (in terms of exposure), how large a share should be set aside for the highest bidder, for the second highest bidder, and so on. We study this problem under a general specification and characterize the optimal share structures that maximize advertising providers' revenues. We also derive results on how the optimal share structure should change with advertisers' price elasticity of demand for exposure, their valuation distribution, total resources, and minimum bids. We draw implications for keyword auctions and other applications.

keyword advertising, sponsored links, share structures, search engine, Internet auctions, divisible goods, Google, Yahoo!

Abstract:
We investigate the value of past performance information in the context of keyword advertising auctions, where advertisers differ both in valuation per click and in the numbers of clicks they can generate (their performance). We focus on weighted unit-price-contract (UPC) auctions, in which bidders bid unit prices and pay accordingly if they win, and their bids are weighted by factors based on their own past performance. We characterize the efficient and the revenue-maximizing weighting factors and apply our framework to study Yahoo!'s and Google's auction designs, each of which can be viewed as a special case of weighted UPC auctions.

UPC auctions, search engine, Google, keyword advertising, multi-dimensional values

Abstract:
A consumer contest is a sales promotion technique that requires participants to apply certain skills as they compete for prizes or awards. Consumer contests are increasingly used in such markets as the fast-growing mobile entertainment industry. We study a one-period model of consumer contest in which consumers' performance is a multiplicative function of their skill and consumption, and the marketer maximizes profits from the aggregate consumption. This paper is the first to employ a game-theoretical approach to investigate consumer contest design issues. We find that the optimal (profit-maximizing) prize structure is either for the winner to take all or for multiple winners to take equal prizes. A winner-take-all prize structure is optimal when the hazard rate of the skill distribution increases. Intuitively, increasing hazard rate implies fiercer competition (thus more consumption) at high-skill levels, and the first prize is most effective in inducing aggregate consumption by high-skilled consumers. Furthermore, when there are many contestants, an increasing (and higher) hazard-rate at high-skill levels is sufficient for winner-take-all prize structure to be optimal. We also find that, as consumers' skill levels become less dispersive, meaning they have more equal skill levels, they will compete more aggressively - to the marketer's benefit. This provides a rationale for the marketer to handicap high-skilled consumers and to segment consumers based on their skill levels. Yet, we do not find segmenting based on non-skill factors, such as geographic regions, to increase the marketer's profits. Finally, when consumers derive little intrinsic value from consumption, the marketer can benefit from charging an entry fee.

consumer contests, prize structure, segmentation, handicapping, entry fee