Keyword Auctions, Unit‐Price Contracts, and the Role of Commitment

Production and Operations Management - Tập 19 Số 3 - Trang 305-321 - 2010
Jianqing Chen1, Juan Feng2, Andrew B. Whinston3
1Haskayne School of Business, University of Calgary, Calgary, AB T2N 1N4, Canada
2College of Business, City University of Hong Kong, Hong Kong, China, Warrington College of Business, University of Florida, Gainesville, FL 32611,
3Department of Information, Risk, and Operations Management, McCombs School of Business, University of Texas at Austin, Austin, Texas 78712,

Tóm tắt

Motivated by the enormous growth of keyword advertising, this paper explores the design of performance‐based unit‐price contract auctions, in which bidders bid their unit prices and the winner is chosen based on both their bids and performance levels. The previous literature on unit‐price contract auctions usually considers a static case where bidders' performance levels are fixed. This paper studies a dynamic setting in which bidders with a low performance level can improve their performance at a certain cost. We examine the effect of the performance‐based allocation on overall bidder performance, auction efficiency, and the auctioneer's revenue, and derive the revenue‐maximizing and efficient policies accordingly. Moreover, the possible upgrade in bidders' performance level gives the auctioneer an incentive to modify the auction rules over time, as is confirmed by the practice of Yahoo! and Google. We thus compare the auctioneer's revenue‐maximizing policies when she is fully committed to the auction rule and when she is not, and show that the auctioneer should give less preferential treatment to low‐performance bidders when she is fully committed.

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Thông tin xuất bản

Production and Operations Management

Tập 19 Số 3

305-321

Thông tin tác giả