Abstract

http://ssrn.com/abstract=1535448
 
 

References (13)



 
 

Citations (3)



 


 



Competing Ad Auctions


Itai Ashlagi


HBS Negotiations, Organizations and Markets Unit

Benjamin G. Edelman


Harvard University - HBS Negotiations, Organizations and Markets Unit

Hoan Soo Lee


Tsinghua University - School of Economics & Management

September 27, 2013

Harvard Business School NOM Unit Working Paper No. 10-055

Abstract:     
We present a two-stage model of competing ad auctions. Search engines attract users via Cournot-style competition. Meanwhile, each advertiser must pay a participation cost to use each ad platform, and advertiser entry strategies are derived using symmetric Bayes-Nash equilibrium that lead to the VCG outcome of the ad auctions. Consistent with our model of participation costs, we find empirical evidence that multi-homing advertisers are larger than single-homing advertisers. We then link our model to search engine market conditions: We derive comparative statics on consumer choice parameters, presenting relationships between market share, quality, and user welfare. We also analyze the prospect of joining auctions to mitigate participation costs, and we characterize when such joins do and do not increase welfare.

Number of Pages in PDF File: 26

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Date posted: January 12, 2010 ; Last revised: September 28, 2013

Suggested Citation

Ashlagi, Itai and Edelman, Benjamin G. and Lee, Hoan Soo, Competing Ad Auctions (September 27, 2013). Harvard Business School NOM Unit Working Paper No. 10-055. Available at SSRN: http://ssrn.com/abstract=1535448 or http://dx.doi.org/10.2139/ssrn.1535448

Contact Information

Itai Ashlagi
HBS Negotiations, Organizations and Markets Unit ( email )
Soldiers Field
Boston, MA 02163
United States
Benjamin G. Edelman (Contact Author)
Harvard University - HBS Negotiations, Organizations and Markets Unit ( email )
Soldiers Field
Boston, MA 02163
United States
HOME PAGE: http://people.hbs.edu/bedelman
Hoan Soo Lee
Tsinghua University - School of Economics & Management ( email )
Beijing, 100084
China
HOME PAGE: http://www.sem.tsinghua.edu.cn/en/hoansoo
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