Working Paper: NBER ID: w15253
Authors: Susan Athey; Glenn Ellison
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.
Keywords: position auctions; consumer search; advertising; auction design
JEL Codes: D44; L86; M37
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| auction mechanism (D44) | consumer beliefs about the quality of displayed ads (L15) |
| consumer beliefs about the quality of displayed ads (L15) | value of winning the auction (D44) |
| reserve prices (D44) | total social surplus (D69) |
| reserve prices (D44) | search costs for consumers (D19) |
| search costs for consumers (D19) | consumer welfare (D69) |
| auction design (D44) | consumer expectations (D84) |
| auction design (D44) | equilibrium outcomes (D51) |
| click-weighted auctions (D44) | efficiency of ad selection (C52) |
| click-weighted auctions (D44) | consumer welfare (D69) |