Auctions, Market Mechanisms, and Their Applications. Second International ICST Conference, AMMA 2011, NewYork, NY, USA, August 22-23, 2011, Revised Selected Papers

Research Article

An Experimental Study of Sponsored-Search Auctions

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  • @INPROCEEDINGS{10.1007/978-3-642-30913-7_7,
        author={Yeon-Koo Che and Syngjoo Choi and Jinwoo Kim},
        title={An Experimental Study of Sponsored-Search Auctions},
        proceedings={Auctions, Market Mechanisms, and Their Applications. Second International ICST Conference, AMMA 2011, NewYork, NY, USA, August 22-23, 2011, Revised Selected Papers},
        proceedings_a={AMMA},
        year={2012},
        month={10},
        keywords={online advertising sponsored search auction generalized second price auction experiment},
        doi={10.1007/978-3-642-30913-7_7}
    }
    
  • Yeon-Koo Che
    Syngjoo Choi
    Jinwoo Kim
    Year: 2012
    An Experimental Study of Sponsored-Search Auctions
    AMMA
    Springer
    DOI: 10.1007/978-3-642-30913-7_7
Yeon-Koo Che1,*, Syngjoo Choi2,*, Jinwoo Kim3,*
  • 1: Columbia University and YERI
  • 2: UCL, University College London
  • 3: Yonsei University
*Contact email: yc2271@columbia.edu, syngjoo.choi@ucl.ac.uk, jikim72@gmail.com

Abstract

We study the Generalized Second Price auctions—a standard method for allocating online search advertising—experimentally, considering both the static environment assumed by the prevailing theory and a dynamic game capturing the salient aspects of real-world search advertising auctions. We find that subjects tend to overbid in both treatments relative to the Vickrey-Clarke-Groves outcome suggested as most plausible by the theory, but that their behavior in the dynamic game resembles the behavior in the static game. Our analysis thus lends support to the use of a static game as modeling proxy, but calls into question the prevailing equilibrium predictions.