Designing Online Auctions With Past Performance Information

Decision Support Systems, Vol. 42, No. 3, pp. 1307-1320, 2006

Posted: 16 Aug 2005 Last revised: 15 Feb 2014

See all articles by De Liu

De Liu

University of Minnesota - Twin Cities - Carlson School of Management

Jianqing Chen

The University of Texas at Dallas, Jindal School of Management

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.

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

JEL Classification: L86, D45

Suggested Citation

Liu, De and Chen, Jianqing, Designing Online Auctions With Past Performance Information. Decision Support Systems, Vol. 42, No. 3, pp. 1307-1320, 2006. Available at SSRN: https://ssrn.com/abstract=772885

De Liu (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Jianqing Chen

The University of Texas at Dallas, Jindal School of Management ( email )

800 West Campbell Road
Richardson, TX 75080
United States

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