Seminarios Académicos

event Publicación: 12/04/2023

Nonparametric Estimation of Sponsored Search Auctions and Impacts of Ad Quality on Search Revenue

Autor: Pallavi Pal

Co autores: DONGWOO KIM

Abstract: This paper presents an empirical model of sponsored search auctions in which advertisers are ranked by bid and ad quality. We introduce a new nonparametric estimator for the advertiser’s ad value and its distribution under the ‘incomplete information’ assumption. The ad value is characterized by a tractable analytical solution given observed auction parameters. Using Yahoo! search auction data, we estimate value distributions and study the bidding behavior across product categories. We find that advertisers shade their bids more when facing less com- petition. We also conduct counterfactual analysis to evaluate the impact of score squashing (ad quality raised to power θ < 1) on the auctioneer’s revenue. Our re- sults show that product-specific score squashing can enhance auctioneer revenue at the expense of advertiser profit and consumer welfare.