Marketing Agencies and Collusive Bidding in Online Ad Auctions

The transition of the advertising market from traditional media to the internet has induced a proliferation of marketing agencies specialized in bidding in the auctions that are used to sell ad space on the web. We analyze how collusive bidding can emerge from bid delegation to a common marketing agency and how this can undermine the revenues and allocative efficiency of both the Generalized Second Price auction (GSP, used by Google and Microsoft-Bing and Yahoo!) and the of VCG mechanism (used by Facebook). We find that, despite its well-known susceptibility to collusion, the VCG mechanism outperforms the GSP auction both in terms of revenues and efficiency

E-commerce and the Market Structure of Retail Industries

While a fast-growing body of research has looked at how the advent and diffusion of e-commerce has affected prices, much less work has investigated e-commerce's impact on the number and type of producers operating in an industry. This paper theoretically and empirically takes up the question of which businesses most benefit and most suffer as consumers switch to purchasing products online. We specify a general industry model involving consumers with differing search costs buying products from heterogeneous-type producers. We interpret e-commerce as having reduced consumers' search costs. We show how such reductions reallocate market shares from an industry's low-type producers to its high-type businesses. We test the model using U.S. data for three industries in which e-commerce has arguably decreased consumers' search costs considerably: travel agencies, bookstores, and new auto dealers. Each industry exhibits the market share shifts predicted by the model. Interestingly, while the industries experienced similar changes, the specific mechanisms through which e-commerce induced them differed. For bookstores and auto dealers, industry-wide declines in small outlets reflected market-specific impacts, evidenced by the fact that more small-store exit occurred in local markets where consumers' use of e-commerce channels grew fastest. For travel agencies, on the other hand, the shifts reflected aggregate changes driven by airlines cutting agent commissions as consumers started buying tickets online.

Bid Coordination in Sponsored Search Auctions: Detection Methodology and Empirical Analysis

Bid delegation to specialized intermediaries is common in the auction systems used to sell internet advertising. When the same intermediary concentrates the demand for ad space from competing advertisers, its incentive to coordinate client bids might alter the functioning of the auctions. This study develops a methodology to detect bid coordination, and presents a strategy to estimate a bound on the search engine revenue losses imposed by coordination relative to a counterfactual benchmark of competitive bidding. Using proprietary data from auctions held on a major search engine, coordination is detected in 55 percent of the cases of delegated bidding that we observed, and the associated upper bound on the search engine’s revenue loss ranges between 5.3 and 10.4 percent

Marketing agencies and collusive bidding in online ad auctions

The transition of the advertising market from traditional media to the internet has induced a proliferationof marketing agencies specialized in bidding in the auctions that are used to sell ad space on the web. We analyze how collusive bidding can emerge from bid delegation to a common marketing agency and how this can undermine the revenues and allocative efficiency of both the Generalized Second Price auction (GSP, used by Google and Microsoft-Bing and Yahoo!) and the of VCG mechanism(used by Facebook). We find that, despite its well-known susceptibility to collusion, the VCG mechanism outperforms the GSP auction both in terms of revenues and efficiency

Recent developments in online Ad Auctions

Online advertising has been growing rapidly during the last two decades and its overall value by now exceeds that of traditional media advertisement in the US. Among the many factors behind this trend, the capacity of auction mechanisms to effectively price what advertisers' value has played a key role in shaping the behavior of the most prominent search engine and social media companies. This essay reviews how the leading auction mechanisms for online ad sales evolved over time, illustrates how these changes can be understood through the lenses of economic theory and applies the same tools to discuss some potential future developments in online ad auctions

Marketing agencies and collusive bidding in online ad auctions

The transition of the advertising market from traditional media to the internet has induced a proliferation of marketing agencies specialized in bidding in the auctions that are used to sell ad space on the web. We analyze how collusive bidding can emerge from bid delegation to a common marketing agency and how this can undermine the revenues and allocative efficiency of both the Generalized Second Price auction (GSP, used by Google and Microsoft-Bing and Yahoo!) and the of VCG mechanism (used by Facebook). We find that, despite its well-known susceptibility to collusion, the VCG mechanism outperforms the GSP auction both in terms of revenues and efficiency

Bid coordination in sponsored search auctions: detection methodology and empirical analysis

Bid delegation to specialized intermediaries is common in the auction systems used to sell internet advertising. When the same intermediary concentrates the demand for ad space from competing advertisers, its incentive to coordinate client bids might alter the functioning of the auctions. This study develops a methodology to detect bid coordination, and presents a strategy to estimate a bound on the search engine revenue losses imposed by coordination relative to a counterfactual benchmark of competitive bidding. Using proprietary data from auctions held on a major search engine, coordination is detected in 55 percent of the cases of delegated bidding that we observed, and the associated upper bound on the search engine’s revenue loss ranges between 5.3 and 10.4 percent

Why Do Delusion-Prone Individuals “Jump to Conclusions”? An Investigation Using a Nonserial Data-Gathering Paradigm

That delusional and delusion-prone individuals gather less evidence before reaching a decision (“jumping to conclusions”) is arguably the most influential finding in the literature on cognitive theories of delusions. However, the cognitive basis of this data-gathering tendency remains unclear. Suggested theories include that delusion-prone individuals gather less data because they (a) misjudge the information value of evidence, (b) find data gathering more taxing than do controls, or (c) make noisier decisions than controls. In the present study we developed a novel, incentivized, nonserial data-gathering task to tease apart these alternatives. Higher delusion-proneness was associated with gathering less information on this task, even when accounting for gender, risk aversion, and intelligence. Our findings suggest that misjudging the information value of evidence contributes substantially to the “jumping to conclusions” bias and that neither higher subjective costs nor noisy decision making can fully account for it. </jats:p