An Experimental Study of Sponsored-Search Auctions

50 Pages Posted: 25 Apr 2011 Last revised: 25 Jan 2015

See all articles by Yeon-Koo Che

Yeon-Koo Che

Columbia University

Syngjoo Choi

University College London

Jinwoo Kim

Seoul National University

Date Written: April 21, 2011

Abstract

We study the Generalized Second Price auctions – a standard method for allocating online search advertising – experimentally, considering both the static environment assumed by the prevailing theory and a dynamic game capturing the salient aspects of real-world search advertising auctions. We find that subjects tend to overbid in both treatments relative to the Vickrey-Clarke-Groves outcome suggested as most plausible by the theory, but that their behavior in the dynamic game resembles the behavior in the static game. Our analysis thus lends support to the use of a static game as modeling proxy, but calls into question the prevailing equilibrium predictions.

Keywords: Online Advertising, Sponsored Search Auction, Generalized Second

JEL Classification: C92, D44, M3

Suggested Citation

Che, Yeon-Koo and Choi, Syngjoo and Kim, Jinwoo, An Experimental Study of Sponsored-Search Auctions (April 21, 2011). Available at SSRN: https://ssrn.com/abstract=1818522 or http://dx.doi.org/10.2139/ssrn.1818522

Yeon-Koo Che

Columbia University ( email )

420 W. 118th Street
New York, NY 10027

Syngjoo Choi

University College London ( email )

Department of Economics
Gower Street
London WC1E 6BT
United Kingdom

HOME PAGE: http://www.homepages.ucl.ac.uk/~uctpsc0/

Jinwoo Kim (Contact Author)

Seoul National University ( email )

1 Gwanak-ro
Gwanak-Gu
Seoul, 08826
Korea, Republic of (South Korea)

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