Position Auctions with Consumer Search
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.
This work was supported by NSF grants SES-0550897 and SES-0351500 and the Toulouse Network for Information Technology. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. Athey is Chief Economist at, and both authors have been employed as consultants by, the Microsoft Corporation, and in those capacities they have studied issues relating to this paper.
Susan Athey & Glenn Ellison, 2011. "Position Auctions with Consumer Search," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1213-1270. citation courtesy of