Abstract

http://ssrn.com/abstract=2062980
 


 



Position Auctions with Budget-Constraints: Implications for Advertisers and Publishers


Shijie Lu


University of Southern California - Marshall School of Business

Yi Zhu


University of Minnesota - Carlson School of Management

Anthony J. Dukes


University of Southern California

January 2, 2015


Abstract:     
This paper examines position auctions with budget-constrained advertisers, a dominant bidding environment used by publishers to allocate positions in online advertising. Budget constraints play a crucial role in equilibrium bidding by inducing advertisers to strategically deplete a higher-ranked advertiser’s budget to gain in rank. This strategic consideration has consequences for both advertisers’ profits and the publisher’s revenue. An advertiser’s profit can strictly decrease with her budget when competition for an advertising space (e.g., a keyword) is intense. The publisher’s revenue can also strictly decrease when an increase in the higher-ranked advertiser’s budget induces the lower-ranked rival to reduce her bid, due to her inability to deplete the higher-ranked advertiser’s budget. Several managerial implications for both advertisers and publishers are discussed.

Number of Pages in PDF File: 51

Keywords: Position Auctions, Budget Constraints, Internet Marketing, Advertising, Game Theory


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Date posted: May 20, 2012 ; Last revised: January 12, 2015

Suggested Citation

Lu, Shijie and Zhu, Yi and Dukes, Anthony J., Position Auctions with Budget-Constraints: Implications for Advertisers and Publishers (January 2, 2015). Available at SSRN: http://ssrn.com/abstract=2062980 or http://dx.doi.org/10.2139/ssrn.2062980

Contact Information

Shijie Lu (Contact Author)
University of Southern California - Marshall School of Business ( email )
701 Exposition Blvd
Los Angeles, CA 90089
United States
Yi Zhu
University of Minnesota - Carlson School of Management ( email )
321 - 19th Ave. South, Suite 3-150
Minneapolis, MN 55455
United States
Anthony J. Dukes
University of Southern California ( email )
701 Exposition Blvd
Los Angeles, CA 90089
United States
213-740-3846 (Phone)
HOME PAGE: http://www-bcf.usc.edu/~dukes/
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