Position Auctions with Consumer Search
NBER Working Paper No. 15253
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.
Published: Susan Athey & Glenn Ellison, 2011. "Position Auctions with Consumer Search," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1213-1270.