[Francesco Decarolis] Common Agency and Coordinated Bids in Sponsored Search Auctions
Common Agency and Coordinated Bids in Sponsored Search Auctions
Francesco Decarolis
Junior Faculty Fellow, Hariri Institute for Computing
Assistant Professor, Department of Economics
Boston University
Joint work with:
Maris Goldmanis (Royal Holloway, University of London)
Antonio Penta (University of Wisconsin-Madison)
Abstract: As auctions are becoming the main mechanism for selling advertisement space on the web, marketing agencies specialized in bidding in online auctions are proliferating. We analyze theoretically how bidding delegation to a common marketing agency can undermine both revenues and efficiency of the generalized second price auction, the format used by Google and Microsoft-Yahoo!. Our characterization allows us to quantify the revenue losses relative to both the case of full competition and the case of agency bidding under an alternative auction format (specifically, the VCG mechanism). We propose a simple algorithm that a search engine can use to reduce efficiency and revenue losses. The method is applied to a sample of auctions held by one of the largest search engine providers.
Bio: Francesco Decarolis joined Boston University in 2012 as an assistant professor in the Department of Economics. He holds a PhD from the University of Chicago. His areas of specialization are industrial organization and market design, with applications to auctions and healthcare insurance markets.