Working Paper: CEPR ID: DP16402
Authors: Dirk Bergemann; Tibor Heumann; Stephen Morris
Abstract: In digital advertising, a publisher selling impressions faces a trade-off in deciding how precisely to match advertisers with viewers. A more precise match generates efficiency gains that the publisher can hope to exploit. A coarser match will generate a thicker market and thus more competition. The publisher can control the precision of the match by controlling the amount of information that advertisers have about viewers. We characterize the optimal trade-off when impressions are sold by auction. The publisher pools premium matches for advertisers (when there will be less competition on average) but gives advertisers full information about lower quality matches.
Keywords: second price auction; conflation; digital advertising; impressions; bayesian persuasion; information design
JEL Codes: D44; D47; D83; D84
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| precision of matching advertisers and viewers (C78) | efficiency gains (D61) |
| coarser match (C78) | increased market thickness and competition (D41) |
| information control (L86) | competition levels (L13) |
| optimal information structure (D83) | revenue maximization (L21) |
| number of bidders (D44) | information sharing (O36) |
| number of bidders (D44) | revenue performance (H27) |