Ads in Conversations
Fuente:
arXiv
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| Autores principales: | , , |
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| Formato: | Preprint |
| Publicado: |
2024
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| Materias: | |
| Acceso en línea: | |
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| _version_ | 1866916598080602112 |
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| author | Banchio, Martino Mehta, Aranyak Perlroth, Andres |
| author_facet | Banchio, Martino Mehta, Aranyak Perlroth, Andres |
| contents | We study the optimal placement of advertisements for interactive platforms like conversational AI assistants. Importantly, conversations add a feature absent in canonical search markets -- time. The evolution of a conversation is informative about ad qualities, thus a platform could delay ad delivery to improve selection. However, delay endogenously shapes the supply of quality ads, possibly affecting revenue. We characterize the equilibria of first- and second-price auctions where the platform can commit to the auction format but not to its timing. We document sharp differences in the mechanisms' outcomes: first-price auctions are efficient but delay ad delivery, while second-price auctions avoid delay but allocate inefficiently. Revenue may be arbitrarily larger in a second-price auction than in a first-price auction. Optimal reserve prices alleviate these differences but flip the revenue ordering. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2403_11022 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | Ads in Conversations Banchio, Martino Mehta, Aranyak Perlroth, Andres Theoretical Economics Computer Science and Game Theory We study the optimal placement of advertisements for interactive platforms like conversational AI assistants. Importantly, conversations add a feature absent in canonical search markets -- time. The evolution of a conversation is informative about ad qualities, thus a platform could delay ad delivery to improve selection. However, delay endogenously shapes the supply of quality ads, possibly affecting revenue. We characterize the equilibria of first- and second-price auctions where the platform can commit to the auction format but not to its timing. We document sharp differences in the mechanisms' outcomes: first-price auctions are efficient but delay ad delivery, while second-price auctions avoid delay but allocate inefficiently. Revenue may be arbitrarily larger in a second-price auction than in a first-price auction. Optimal reserve prices alleviate these differences but flip the revenue ordering. |
| title | Ads in Conversations |
| topic | Theoretical Economics Computer Science and Game Theory |
| url | https://arxiv.org/abs/2403.11022 |