Position auctions with externalities

DOI10.1007/978-3-319-13129-0_33MaRDI QIDQ2937003zbMATH OpenOpenAlexFDO

Authors Patrick Hummel, R. Preston McAfee

Publication date 7 January 2015

Published in Web and Internet Economics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1409.4687

zbMATH Keywords

externalitiesoptimal allocation of adsposition auctions

Mathematics Subject Classification ID

Marketing, advertising (90B60) Auctions, bargaining, bidding and selling, and other market models (91B26)

Abstract: This paper presents models for predicted click-through rates in position auctions that take into account two possibilities that are not normally considered---that the identities of ads shown in other positions may affect the probability that an ad in a particular position receives a click (externalities) and that some ads may be less adversely affected by being shown in a lower position than others (brand effects). We present a general axiomatic methodology for how click probabilities are affected by the qualities of the ads in the other positions, and illustrate that using these axioms will increase revenue as long as higher quality ads tend to be ranked ahead of lower quality ads. We also present appropriate algorithms for selecting the optimal allocation of ads when predicted click-through rates are governed by either the models of externalities or brand effects that we consider. Finally, we analyze the performance of a greedy algorithm of ranking the ads by their expected cost-per-1000-impressions bids when the true click-through rates are governed by our model of predicted click-through rates with brand effects and illustrate that such an algorithm will potentially cost as much as half of the total possible social welfare.

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Cited in

(12)

• Towards better models of externalities in sponsored search auctions
• Matching through position auctions
• Assortment optimization under a multinomial logit model with position bias and social influence
• Prediction and welfare in ad auctions
• The multiple attribution problem in pay-per-conversion advertising
• Research on advertising auction model based on interest
• Position Auctions with Budgets: Existence and Uniqueness
• Estimating advertisers' values for paid search clickthroughs
• Towards better models of externalities in sponsored search auctions
• Prediction and welfare in ad auctions
• Bidding to the Top: VCG and Equilibria of Position-Based Auctions
• Assortment optimization with position effects under the nested logit model

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