How Do Digital Advertising Auctions Impact Product Prices?
Fuente:
arXiv
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| Autori principali: | , , |
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| Natura: | Preprint |
| Pubblicazione: |
2023
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| _version_ | 1866909179400159232 |
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| author | Bergemann, Dirk Bonatti, Alessandro Wu, Nicholas |
| author_facet | Bergemann, Dirk Bonatti, Alessandro Wu, Nicholas |
| contents | We present a model of digital advertising with three key features: (i) advertisers can reach consumers on and off a platform, (ii) additional data enhances the value of advertiser-consumer matches, and (iii) bidding follows auction-like mechanisms. We contrast data-augmented auctions, which leverage the platform's data advantage to improve match quality, and managed campaign mechanisms that automate match formation and price-setting. The platform-optimal mechanism is a managed campaign that conditions on-platform prices for sponsored products on the off-platform prices set by all advertisers. This mechanism yields the efficient on-platform allocation but inefficient off-platform allocations due to high product prices; it attains the vertical integration profit for the platform and advertisers; and it increases off-platform product prices and decreases consumer surplus, relative to data-augmented auctions. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2304_08432 |
| institution | arXiv |
| publishDate | 2023 |
| record_format | arxiv |
| spellingShingle | How Do Digital Advertising Auctions Impact Product Prices? Bergemann, Dirk Bonatti, Alessandro Wu, Nicholas Theoretical Economics Computer Science and Game Theory We present a model of digital advertising with three key features: (i) advertisers can reach consumers on and off a platform, (ii) additional data enhances the value of advertiser-consumer matches, and (iii) bidding follows auction-like mechanisms. We contrast data-augmented auctions, which leverage the platform's data advantage to improve match quality, and managed campaign mechanisms that automate match formation and price-setting. The platform-optimal mechanism is a managed campaign that conditions on-platform prices for sponsored products on the off-platform prices set by all advertisers. This mechanism yields the efficient on-platform allocation but inefficient off-platform allocations due to high product prices; it attains the vertical integration profit for the platform and advertisers; and it increases off-platform product prices and decreases consumer surplus, relative to data-augmented auctions. |
| title | How Do Digital Advertising Auctions Impact Product Prices? |
| topic | Theoretical Economics Computer Science and Game Theory |
| url | https://arxiv.org/abs/2304.08432 |