Position Auctions with Consumer Search

54 Pages Posted: 18 Aug 2009 Last revised: 6 Sep 2010

See all articles by Susan Athey

Susan Athey

Stanford Graduate School of Business

Glenn Ellison

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: August 2009

Abstract

This paper examines a model in which advertisers bid for "sponsored-link" positions on a search engine. The value advertisers derive from each position is endogenized as coming from sales to a population of consumers who make rational inferences about firm qualities and search optimally. Consumer search strategies, equilibrium bidding, and the welfare benefits of position auctions are analyzed. Implications for reserve prices and a number of other auction design questions are discussed.

Suggested Citation

Carleton Athey, Susan and Ellison, Glenn David, Position Auctions with Consumer Search (August 2009). NBER Working Paper No. w15253. Available at SSRN: https://ssrn.com/abstract=1454986

Susan Carleton Athey

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Glenn David Ellison (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Room E52-380B
Cambridge, MA 02142
United States
617-253-8702 (Phone)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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