position auctions with consumer search this paper examines a model in which advertisers bid for sponsored link positions on a search engine the value advertisers derive from each position is endogenized as coming from sales to a population of consumers who make rational inferences about rm qualities and search optimally consumer search strategies equilibrium bidding and the welfare benets of position auctions are analyzed implications for reserve prices and a number of other auction design questions are discussed

revenue maximizing rankings for online platforms with quality sensitive consumers when a customer searches for a keyword at a classified ads website at an online retailer or at a search engine se the platform has exponentially many choices in how to sort the output to the query the two extremes are a to consider a ranking based on relevance only which attracts more customers in the long run because of perceived quality and b to consider a ranking based on the expected revenue to be generated by immediate conversions which maximizes short term revenue typically these two objectives are not perfectly positively correlated and hence the main question is what middle ground between them should be chosen we introduce stochastic models and propose effective solution methods that can be used to optimize the ranking considering long term revenues a key feature of our model is that customers are quality sensitive and are attracted to the platform or driven away depending on the average relevance of the output the proposed methods are of crucial importance in e business and encompass i classified ad websites which can favor paid ads by ranking them higher ii online retailers which can rank products they sell according to buyers interests and or the margins these products have iii ses which can position the content that they serve higher in the output page than third party content to keep users in their platforms for longer and earn more this goes in detriment of just offering rankings based on relevance only and is directly linked to the current search neutrality debate

bidding for army career specialties improving the rotc branching mechanism motivated by the low retention rates of us military academy and reserve officer training corps graduates the army recently introduced incentives programs in which cadets could bid 3 years of additional service obligation to obtain higher priority for their desired branches the full potential of this incentives program is not utilized because of the rotc s deficient matching mechanism i propose a design that eliminates these shortcomings and mitigates several policy problems the army has identified in contrast to the rotc mechanism my design utilizes market principles more extensively and it is a hybrid between a market mechanism and a priority based allocation mechanism

financial inclusion and financial integrity aligned incentives summary the financial action task force embraces financial inclusion as complementary to anti money laundering and counter terrorist financing as it enhances transparency this support is based on the premise that the increased use of formal financial services leads to a reduction of usage of informal services we present evidence on eight african countries that both are not negatively associated moreover informal employment and cash preference reduce the inclination to use mobile financial services if an increase in transparency acts as disincentive to use formal services the alignment of financial inclusion and integrity will fail

internet advertising and the generalized second price auction selling billions of dollars worth of keywords we investigate the generalized second price gsp auction a new mechanism used by search engines to sell online advertising although gsp looks similar to the vickrey clarke groves vcg mechanism its properties are very different unlike the vcg mechanism gsp generally does not have an equilibrium in dominant strategies and truth telling is not an equilibrium of gsp to analyze the properties of gsp we describe the generalized english auction that corresponds to gsp and show that it has a unique equilibrium this is an ex post equilibrium with the same payoffs to all players as the dominant strategy equilibrium of vcg

generalized second price auction is optimal for discrete types we prove that a variant of the second price auction for the sale of a single good through a bayesian incentive compatible mechanism that maximizes expected revenue of the seller is optimal when the type space is discrete moreover we show that this variant is related to the widely used generalized second price auction mechanism in keyword auctions for advertising thus providing a theoretical justification for a practical tool

simultaneous auctions without complements are almost efficient abstract a simultaneous item auction is a simple procedure for allocating multiple indivisible goods to a set of bidders in a simultaneous auction every bidder submits bids on all items simultaneously the allocation and prices are then resolved for each item separately based solely on the bids submitted on that item such procedures are similar to auctions used in practice e g ebay but are not incentive compatible we study the efficiency of bayesian nash equilibrium bne outcomes of simultaneous first and second price auctions when bidders have complement free a k a subadditive valuations we show that the expected social welfare of any bne is at least 1 2 of the optimal social welfare in the case of first price auctions and at least 1 4 in the case of second price auctions

online ad auctions i describe how search engines sell ad space using an auction i analyze advertiser behavior in this context using elementary price theory and derive a simple way to estimate the producer surplus generated by online search advertising it appears that the estimated value of online advertising tends to be between 2 and 2 3 times advertising expenditures jel d44 auctions d21 firm behavior

analyzing the relationship between organic and sponsored search advertising positive negative or zero interdependence the phenomenon of paid search advertising has now become the most predominant form of online advertising in the marketing world however we have little understanding of the impact of search engine advertising on consumers responses in the presence of organic listings of the same firms in this paper we model and estimate the interrelationship between organic search listings and paid search advertisements we use a unique panel data set based on aggregate consumer response to several hundred keywords over a three month period collected from a major nationwide retailer store chain that advertises on google in particular we focus on understanding whether the presence of organic listings on a search engine is associated with a positive a negative or no effect on the click through rates of paid search advertisements and vice versa for a given firm we first build an integrated model to estimate the relationship between different metrics such as search volume click through rates conversion rates cost per click and keyword ranks a hierarchical bayesian modeling framework is used and the model is estimated using markov chain monte carlo methods our empirical findings suggest that click throughs on organic listings have a positive interdependence with click throughs on paid listings and vice versa we also find that this positive interdependence is asymmetric such that the impact of organic clicks on increases in utility from paid clicks is 3 5 times stronger than the impact of paid clicks on increases in utility from organic clicks using counterfactual experiments we show that on an average this positive interdependence leads to an increase in expected profits for the firm ranging from 4 2 to 6 15 when compared to profits in the absence of this interdependence to further validate our empirical results we also conduct and present the results from a controlled field experiment this experiment shows that total click through rates conversions rates and revenues in the presence of both paid and organic search listings are significantly higher than those in the absence of paid search advertisements the results predicted by the econometric model are also corroborated in this field experiment which suggests a causal interpretation to the positive interdependence between paid and organic search listings given the increased spending on search engine based advertising our analysis provides critical insights to managers in both traditional and internet firms

elicitation of honest preferences for the assignment of individuals to positions the problem of eliciting honest preferences from individuals who must be assigned to a set of positions is considered individuals know that they will be charged for the positions to which they are assigned a set of prices that provide no incentive for the individual to misrepresent his preferences is suggested it is shown that these prices constitute an element of the optimal solution to the dual of a linear programming assignment problem both the optimal allocation and the prices to be charged can be derived by solving two linear programming problems once preferences have been elicited the procedure can usefully be viewed as a simulation of a competitive market under conditions where such a market cannot be expected to function well it results in an efficient allocation where all resources are valued at their opportunity costs and consumer surplus is maximized its outcome thus has the desirable properties of competitive market equilibria

optimal dynamic mechanism design and the virtual pivot mechanism we consider the problem of designing optimal mechanisms for settings where agents have dynamic private information we present the virtual pivot mechanism which is optimal in a large class of environments that satisfy a separability condition the mechanism satisfies a rather strong equilibrium notion it is periodic ex post incentive compatible and individually rational we provide both necessary and sufficient conditions for immediate incentive compatibility for mechanisms that satisfy periodic ex post incentive compatibility in future periods the result also yields a strikingly simple mechanism for selling a sequence of items to a single buyer we also show that the allocation rule of the virtual pivot mechanism has a very simple structure a virtual index in multiarmed bandit settings finally we show through examples that the relaxation technique we use does not produce optimal dynamic mechanisms in general nonseparable environments

computer mediated transactions every now and then a set of technologies becomes available that sets off a period of combinatorial innovation think of standardized mechanical parts in the 1800s the gasoline engine in the early 1900s electronics in the 1920s integrated circuits in the 1970s and the internet in the last decade or so the component parts of these technologies can be combined and recombined by innovators to create new devices and applications since these innovators are working in parallel with similar components it is common to see simultaneous invention there are many well known examples such as the electric light the airplane the automobile and the telephone many scholars have described such periods of innovation using terms such as recombinant growth general purpose technologies cumulative synthesis and clusters of innovation the internet and the web are wonderful examples of combinatorial innovation in the last 15 years we have seen a huge proliferation of web applications all built from a basic set of component technologies the internet itself was a rather unlikely innovation i like to describe it as a lab experiment that got loose since the internet arose from the research community rather than the private sector it had no obvious business model other public computer networks such as aol compuserve and minitel generally used a subscription models but were centrally controlled and offered little scope for innovation at the user level the internet won out over these alternatives precisely because it offered a flexible set of component technologies which encouraged combinatorial innovation

what has been learned about labor supply in the past twenty years the main advance in the study of labor supply in the past 20 years has come in recognizing and interpreting the variety of different labor supply functions that coexist in the empirical literature a crucial theoretical distinction with important empirical payoff is that between labor supply choices at the extensive margin i e labor force participation and employment choices and choices at the intensive margin i e choices about hours of work or weeks of work for workers another important distinction is the one between a descriptive labor supply function and a structural supply function that can be the basis for out of sample policy investigations concerning responses to tax and welfare programs and evaluations of welfare losses a full understanding of the participation hours dichotomy leads to an appreciation of the importance of the problem of selection bias what is the wage to impute to a nonworking person these distinctions are a legacy of the research conducted on labor supply over the past 20 years many important empirical questions have been addressed i how strong are the effects of taxes welfare and transfer programs on labor supply ii how important is intertemporal substitution can life cycle labor supply models explain business cycle labor supply behavior iii has the consensus view of the 1960 s of high labor supply elasticities for married women and low labor supply elasticities for married men held up all of the empirical evidence assembled on labor supply must be called into question in the light of important research on the basic quality of the data conducted by analysts at the university of michigan i discuss this evidence in a concluding section except for my discussion of measurement issues i focus only on the major discoveries about which a general consensus has emerged

non optimal mechanism design the optimal allocation of resources in complex environments like allocation of dynamic wireless spectrum cloud computing services and internet advertising is computationally challenging even given the true preferences of the participants in the theory and practice of optimization in complex environments a wide variety of special and general purpose algorithms have been developed these algorithms produce outcomes that are satisfactory but not generally optimal or incentive compatible this paper develops a very simple approach for converting any potentially non optimal algorithm for optimization given the true participant preferences into a bayesian incentive compatible mechanism that weakly improves social welfare and revenue jel d82 h82 l82

robust implementation in direct mechanisms a social choice function is robustly implementable if there is a mechanism under which the process of iteratively eliminating strictly dominated messages lead to outcomes that agree with the social choice function for all beliefs at every type profile in an interdependent value environment with single crossing preferences we identify a contraction property on the preferences which together with strict ex post incentive compatibility is sufficient to guarantee robust implementation in the direct mechanism strict ex post incentive compatibility and the contraction property are also necessary for robust implementation in any mechanism including indirect ones the contraction property requires that the interdependence is not too high in a linear signal model the contraction property is equivalent to an interdependence matrix having all eigenvalues smaller than one

priority auctions and queue disciplines that depend on processing time we analyze the allocation of priority in queues via simple bidding mechanisms in our model the stochastically arriving customers are privately informed about their own processing time they make bids upon arrival at a queue whose length is unobservable we consider two bidding schemes that differ in the definition of bids these may reflect either total payments or payments per unit of time and in the timing of payments before or after service in both schemes a customer obtains priority over all customers waiting in the queue or arriving while he is waiting who make lower bids our main results show how the convexity concavity of the function expressing the costs of delay determines the queue discipline i e shortest processing time first spt longest processing time first lpt arising in a bidding equilibrium

prejudice and wages an empirical assessment of becker s the economics of discrimination we test the predictions from becker s 1957 seminal work on employer prejudice and find that relative black wages a vary negatively with the prejudice of the marginal white in a state b vary negatively with the prejudice in the lower tail of the prejudice distribution but are unaffected by the prejudice of the most prejudiced persons in a state and c vary negatively with the fraction of a state that is black our estimates suggest that one quarter of the racial wage gap is due to prejudice with nontrivial consequences for black lifetime earnings

5 information impact and allocation rules in auctions with affiliated private values a laboratory study in affiliated private value auctions each bidder has perfect information regarding his her own value for the object at auction but higher values of the item for one bidder make higher values for other bidders more likely we report on a series of experiments examining three key implications of these auctions i in a first price auction public information about rivals values increases expected revenue ii an english auction increases expected revenue compared to a first price auction and iii a second price auction is isomorphic to an english auction in examining these issues we compare predictions of some ad hoc bidding models with nash equilibrium predictions in the first price auction experiments nash equilibrium bidding theory organizes the data better than either of two ad hoc bidding models public information about others valuations does increase average revenue but the increase in revenue is smaller and less reliable than predicted under risk neutral nash equilibrium bidding lower average revenue might be attributed to risk aversion while the high variability is attributed to a sizable frequency of individual bidding errors relative to the theory bidding theory precisely organizes english auction outcomes after a brief initial learning period the dominant strategy equilibrium does not organize second price auctions nearly as well as market prices persistently exceed predicted prices the difference between english and second price outcomes is attributed to effects of different information flows inherent in the structure of the two institutions on eliminating bidding errors revenue impacts of these two institutions relative to a first price auction are examined in light of observed bidding patterns

matching value and market design in online advertising networks an empirical analysis advertising networks have recently played an increasingly important role in the online advertising market critical to the success of an advertising network are two mechanisms an allocation mechanism that efficiently matches advertisers with publishers and a pricing scheme that maximally extracts surplus from the matches in this paper we quantify the value and investigate the determinants of a successful advertiser publisher match using data from taobao s advertising network a counterfactual experiment reveals that the platform s profit under a decentralized allocation mechanism is close to the profit level when the platform centrally assigns the matching under perfect platform knowledge of matching values in another counterfactual experiment we explore the effect of platform technology and revenue model on the strategic choice of the pricing schemes of list price versus generalized second price gsp auction pricing we find that platforms that profit from the advertiser side may have less incenti

bounding the inefficiency of outcomes in generalized second price auctions abstract the generalized second price gsp auction is the primary auction used for monetizing the use of the internet it is well known that truthtelling is not a dominant strategy in this auction and that inefficient equilibria can arise edelman et al 2007 11 and varian 2007 36 show that an efficient equilibrium always exists in the full information setting their results however do not extend to the case with uncertainty where efficient equilibria might not exist in this paper we study the space of equilibria in gsp and quantify the efficiency loss that can arise in equilibria under a wide range of sources of uncertainty as well as in the full information setting the traditional bayesian game models uncertainty in the valuations types of the participants the generalized second price gsp auction gives rise to a further form of uncertainty the selection of quality factors resulting in uncertainty about the behavior of the underlying ad allocation algorithm the bounds we obtain apply to both forms of uncertainty and are robust in the sense that they apply under various perturbations of the solution concept extending to models with information asymmetries and bounded rationality in the form of learning strategies we present a constant bound 2 927 on the factor of the efficiency loss price of anarchy of the corresponding game for the bayesian model of partial information about other participants and about ad quality factors for the full information setting we prove a surprisingly low upper bound of 1 282 on the price of anarchy over pure nash equilibria nearly matching a lower bound of 1 259 for the case of three advertisers further we do not require that the system reaches equilibrium and give similarly low bounds also on the quality degradation for any no regret learning outcome our conclusion is that the number of advertisers in the auction has almost no impact on the price of anarchy and that the efficiency of gsp is very robust with respect to the belief and rationality assumptions imposed on the participants

split award contracts with investment abstract this paper studies procurement contracts where a buyer can either divide full production among multiple suppliers or award the entire production to a single supplier we examine the effect of using multiple suppliers on investment incentives in a framework of generalized second price auctions with pre auction investment we show that the optimality of split award depends on the socially efficient number of firms at the investment stage when that number is greater than one sole sourcing is buyer optimal when that number is one split award lowers the buyer procurement cost

position effects in search advertising and their moderators a regression discontinuity approach we investigate the causal effect of position in search engine advertising listings on outcomes such as click through rates and sales orders because positions are determined through an auction there are significant selection issues in measuring position effects a simple mean comparison of outcomes at two positions is likely to be biased due to these selection issues additionally experimentation is rendered difficult in this situation by competitors bidding behavior which induces selection biases that cannot be eliminated by randomizing the bids for the focal advertiser econometric approaches to address the selection are rendered infeasible due to the difficulty of finding suitable instruments in this context we show that a regression discontinuity rd approach is feasible to measure causal effects in this important context we apply the approach to a large and unique data set of daily observations containing information on a focal advertiser as well as its major competitors our rd estimates demonstrate that there are significant selection biases in the more naive estimates while a mean comparison of outcomes across positions would indicate very large position effects we find that our rd estimates of these effects are much smaller and exist only in some of the positions we further investigate moderators of these effects position effects are stronger when the advertiser is smaller and when the consumer has low prior experience with the keyword for the advertiser they are weaker when the keyword phrase has specific brand or product information when the ad copy is more specific as in exact matching options and on weekends compared to weekdays

fair by design multidimensional envy free mechanisms abstract we address the common scenario where a group of agents wants to divide a set of items fairly and at the same time seeks to optimize a global goal suppose that each item is a task and we want to find an allocation that minimizes the completion time of the last task in an envy free manner where no agent prefers anyone else s allocated task bundle over its own this optimization goal is called makespan minimization and the agents are often treated as machines we give tight deterministic bounds for 1 two unrelated machines and 2 m 2 related machines a natural question to ask is whether envy free pricing techniques can improve the current known bounds for truthful mechanisms for the task scheduling problem studied in the seminal paper of nisan and ronen 2001 we find that for two unrelated machines envy free in expectation is a far weaker constraint i e less restrictive than truthful in expectation

the optimal allocation of prizes in contests we study a contest with multiple not necessarily equal prizes contestants have private information about an ability parameter that affects their costs of bidding the contestant with the highest bid wins the first prize the contestant with the second highest bid wins the second prize and so on until all the prizes are allocated all contestants incur their respective costs of bidding the contest s designer maximizes the expected sum of bids our main results are 1 we display bidding equlibria for any number of contestants having linear convex or concave cost functions and for any distribution of abilities 2 if the cost functions are linear or concave then no matter what the distribution of abilities is it is optimal for the designer to allocate the entire prize sum to a single first prize 3 we give a necessary and sufficient conditions ensuring that several prizes are optimal if contestants have a convex cost function

in google we trust we examine the incentives of a monopolistic search engine funded by advertising to provide reliable search results we distinguish two types of search results sponsored and organic not paid for organic results are most important in searches for online content while sponsored results are more important in product searches by modeling the underlying markets for online content and offline products we can identify the sources of distortions for each type of result and their interaction this explicit treatment proves crucial for understanding not only spillovers across markets but also fundamental policy issues such as the welfare effects of integration in particular integration of the engine with a small fraction of content providers is welfare enhancing when incentives to distort are stronger for sponsored than organic search but welfare reducing in the opposite case

bayes nash equilibria of the generalized second price auction abstract we develop a bayes nash analysis of the generalized second price gsp auction the multi unit auction used by search engines to sell sponsored advertising positions our main result characterizes the efficient bayes nash equilibrium of the gsp and provides a necessary and sufficient condition that guarantees existence of such an equilibrium with only two positions this condition requires that the click through rate of the second position is sufficiently smaller than that of the first when an efficient equilibrium exists we provide a necessary and sufficient condition for the auction revenue to decrease as click through rates increase interestingly under optimal reserve prices revenue increases with the click through rates of all positions further we prove that no inefficient equilibrium of the gsp can be symmetric our results are in sharp contrast with the previous literature that studied the gsp under complete information

price competition and endogenous valuation in search advertising abstract this article studies how to endogenously assess the value of a superior advertising position in the price competition and examines the resulting location competition outcomes and price dispersion patterns the authors consider a game theoretic model in which firms compete for advertising positions and then compete in price for customers in a product market firms differ in their competence and positions are differentiated in their prominence which reflects consumers online search behavior they find that when endogenously evaluated within the product market competition a prominent advertising position might not always be desirable for a firm with competitive advantage even if it is cost free the profitability of a prominent advertising position depends on the trade off between the extra demand from winning the position and the higher equilibrium prices when the weaker competitor wins it furthermore the authors show that the bidding outcome might not align with the relative competitive s

simplified mechanisms with an application to sponsored search auctions abstract a mechanism can be simplified by restricting its message space if the restricted message spaces satisfy a certain outcome closure property then the simplification is tight for every e 0 any e nash equilibrium of the simplified mechanism is also an e nash equilibrium of the unrestricted mechanism prominent auction and matching mechanisms are tight simplifications of mechanisms studied in economic theory and often incorporate price adjustment features that facilitate simplification the generalized second price auction used for sponsored search advertising is a tight simplification of a series of second price auctions that eliminates the lowest revenue equilibrium outcomes and leaves intact only higher revenue equilibria

discrimination nepotism and long run wage differentials the wage discrimination model developed by becker has been criticized for predicting that competitive forces will lead to the disappearance of racial discrimination in the long run we have reformulated the model in terms of nepotism toward white workers rather than discrimination against black workers in this new framework both nepotistic and taste neutral firms are expected to survive the competitive struggle in the long run therefore the new framework is consistent with long run as well as short run racial wage differentials

obviously strategy proof mechanisms what makes some strategy proof mechanisms easier to understand than others to address this question i propose a new solution concept a mechanism is obviously strategy proof osp if it has an equilibrium in obviously dominant strategies this has a behavioral interpretation a strategy is obviously dominant if and only if a cognitively limited agent can recognize it as weakly dominant it also has a classical interpretation a choice rule is osp implementable if and only if it can be carried out by a social planner under a particular regime of partial commitment i fully characterize the set of osp mechanisms in a canonical setting with one dimensional types and transfers a laboratory experiment tests and corroborates the theory

comparing predicted prices in auctions for online advertising abstract online publishers sell opportunities to show ads some advertisers pay only if their ad elicits a user response publishers estimate response rates for ads in order to estimate expected revenues from showing the ads then publishers select ads that maximize estimated expected revenue by taking a maximum among estimates publishers inadvertently select ads based on a combination of actual expected revenue and inaccurate estimation of expected revenue publishers can increase actual expected revenue by selecting ads to maximize a combination of estimated expected revenue and estimation accuracy

adverse selection and auction design for internet display advertising abstract we model an online display advertising environment in which performance advertisers can measure the value of individual impressions whereas brand advertisers cannot if advertiser values for ad opportunities are positively correlated second price auctions for impressions can be inefficient and expose brand advertisers to adverse selection bayesian optimal auctions have other drawbacks they are complex introduce incentives for false name bidding and do not resolve adverse selection we introduce modified second bid auctions as the unique auctions that overcome these disadvantages when advertiser match values are drawn independently from heavy tailed distributions a modified second bid auction captures at least 94 8 percent of the first best expected value in that setting and similar ones the benefits of switching from an ordinary second price auction to the modified second bid auction may be large and the cost of defending against shill bidding and adverse selection may be low j

consumer heterogeneity and paid search effectiveness a large scale field experiment internet advertising has been the fastest growing advertising channel in recent years with paid search ads comprising the bulk of this revenue we present results from a series of large scale field experiments done at ebay that were designed to measure the causal effectiveness of paid search ads because search clicks and purchase intent are correlated we show that returns from paid search are a fraction of non experimental estimates as an extreme case we show that brand keyword ads have no measurable short term benefits for non brand keywords we find that new and infrequent users are positively influenced by ads but that more frequent users whose purchasing behavior is not influenced by ads account for most of the advertising expenses resulting in average returns that are negative

computational analysis of perfect information position auctions abstract after experimentation with other designs major search engines converged on weighted generalized second price auctions wgsps for selling keyword advertisements theoretical analysis is still not able to settle the question of why they found this design preferable to other alternatives we approach this question in a new way adopting an analytical paradigm we dub computational mechanism analysis specifically we sample position auction games from a given distribution encode them in a computationally efficient representation language compute their nash equilibria and calculate economic quantities of interest we considered seven widely studied valuation models from the literature and three position auction variants we found that wgsp consistently showed the best ads of any position auction measured both by social welfare and expected number of clicks in contrast we found that revenue was extremely variable across auction mechanisms and was highly sensitive to equilibrium selection the preference model and the valuation distribution

paying for prominence we investigate three ways in which firms can become prominent and thereby influence the order in which consumers consider options first firms can affect an intermediary s sales efforts by means of commission payments when firms pay commission to a salesman the salesman promotes the product with the highest commission and steers ignorant consumers towards the more expensive product second sellers can advertise prices on a price comparison website so that consumers investigate the suitability of products in order of increasing price in such a market equilibrium prices are lower when search costs are higher since a firm s benefit from being investigated first increases with search costs finally consumers might first consider their existing supplier when they purchase a new product which suggests a relatively benign rationale for the prevalence of cross selling in markets such as retail banking

discrimination and skill differences in an equilibrium search model in this paper we analyze an equilibrium search model with three sources for wage an d unemployment differentials among workers with the same observed human capital but differen t appearance race unobserved productivity skill search in tensities and discrimination becker 1957 due to an appearance based employer disutility factor because they affect the earnings distributions differently empirical identification of these potential sources for the explanation of wage an d unemployment differentials is possible we show that the structural parameters of the model including the firm s disutility from certain workers are identifiab le using standard labor market survey data we demonstrate identification using data from the national longitudinal survey of youth estimation of these parameters by matching moments from a sample of black and white high school graduate s implies a blacks have a 9 lower productivi ty level than whites b the disutility factor in employer s preferences is one third of the white s productivity level and c 50 of firms have a disutility factor in their utility toward blacks

obvious ex post equilibrium abstract i propose a new solution concept obvious ex post oxp equilibrium this is a formal standard of cognitive simplicity for mechanisms in settings with interdependent values under some standard assumptions the ascending auction has an efficient oxp equilibrium i discuss a decision theoretic foundation for oxp mechanisms

complements and substitutes in sequential auctions the case of water auctions we use data on sequential water auctions to estimate demand when units are com plements or substitutes a sequential english auction model determines the estimating structural equations when units are complements one bidder wins all units by paying a high price for the first unit thus deterring others from bidding on subsequent units when units are substitutes different bidders win the units with positive probability paying prices similar in magnitude even when the same bidder wins all units we re cover individual demand consistent with this stark pattern of outcomes and confirm it is not collusive but consistent with non cooperative behavior demand estimates are biased if one ignores these features

matching with contracts we develop a model of matching with contracts which incorporates as special cases the college admissions problem the kelso crawford labor market matching model and ascending package auctions we introduce a new law of aggregate demand for the case of discrete heterogeneous workers and show that when workers are substitutes this law is satisfied by profit maximizing firms when workers are substitutes and the law is satisfied truthful reporting is a dominant strategy for workers in a worker offering auction matching algorithm we also parameterize a large class of preferences satisfying the two conditions

loss functions for predicted click through rates in auctions for online advertising summary we characterize the optimal loss functions for predicted click through rates in auctions for online advertising whereas standard loss functions such as mean squared error or log likelihood severely penalize large mispredictions while imposing little penalty on smaller mistakes a loss function reflecting the true economic loss from mispredictions imposes significant penalties for small mispredictions and only slightly larger penalties on large mispredictions we illustrate that when the model is misspecified using such a loss function can improve economic efficiency but the efficiency gain is likely to be small

optimal auction design in two sided markets a key feature of online markets for advertising e g sponsored links is that clicking rates depend on the searchers expectations that the platform selects relevant advertisers this article studies auction design by a platform that maximizes profits in the long run where clicking rates are mechanism dependent in line with the practice of the major search engines the revenue maximizing mechanism is a scoring auction that combines the willingness to pay and the relevance to searchers of advertisers by trading off rent extraction and clicking volume this mechanism works as a cross subsidization device between searchers and advertisers

matching with branch of choice contracts at the united states military academy branch selection is a key decision in a cadet s military career cadets at usma can increase their branch priorities at a fraction of slots by extending their service agreement this real life matching problem lls an important gap in market design literature although priorities fail a key substitutes condition the agent optimal stable mechanism is well dened and in contrast to the current usma mechanism it is fair stable and strategy proof adoption of this mechanism benets cadets and the army this new

wage discrimination and population composition in the long run we derive the conditions that sign the effects of changing population composition on wage levels and ratios when labor supply and discrimination preferences vary the overall effect depends on an aggregate market a relative market and a preference distribution effect

mediators in position auctions abstract a mediator is a reliable entity which plays on behalf of the players who give her the right to play the mediator acts in a pre specified way based on messages received from the players however a mediator cannot enforce behavior that is players can play in the game directly without the mediator s help a mediator generates a new game for the players the mediated game the outcome in the original game of an equilibrium in the mediated game is called a mediated equilibrium monderer and tennenholtz introduced a theory of mediators for games with complete information we extend the theory of mediators to games with incomplete information and apply the new theory to position auctions a central topic in electronic commerce we provide a minimal set of conditions on position auctions which is sufficient to guarantee that the vcg outcome function is a mediated equilibrium in these auctions

theoretical and experimental investigations of the performance of keyword auction mechanisms two keyword auction mechanisms the generalized second price auction gsp and the vickrey clarke groves mechanism vcg were compared theoretically and experimentally the former is widely used in practice the latter is not but it has a dominant strategy equilibrium where all participants bid their true values in the theoretical investigation by applying the locally envy free nash equilibrium to the vcg we found that the allocations are efficient and that upper and lower bounds of the auctioneer s revenue coincide in the two mechanisms a laboratory experiment in which the revenues and efficiencies were similar in both mechanisms supported this result

learning and pricing models for repeated generalized second price auction in search advertising abstract in search advertising how much an advertiser is willing to pay for a click or tap on his search ad is private information which hampers an ad seller s ability to set the best reserve price to increase the revenue for the generalized second price gsp auctions used to allocate ad slots we present a series of learning and pricing models for repeated gsp auctions selling multiple heterogeneous items this paper contributes to the literature in dynamic pricing with learning and complements the existing off line studies on impact of the reserve price in the multi billion dollar online advertising business with few restrictions on the distribution function of the unknown parameter algorithms are developed to estimate the empirical distribution function and determine the best reserve price to reduce the revenue loss regret over time when bidders bid in the locally envy free equilibrium we present an algorithm that has the best attainable regret upper bound when bidders do not bid in the locally envy free equilibrium we propose a gsp auction with position specific reserve prices and develop an algorithm with the same regret bound to mitigate the risk of strategic bidding with a high volatility involved learning becomes more active while earning is more effective when bidders coordinate bidding the properly selected starting reserve prices can substantially reduce the revenue loss from possible collusive bidding behaviors

multi item auctions a collection of items is to be distributed among several bidders and each bidder is to receive at most one item assuming that the bidders place some monetary value on each of the items it has been shown that there is a unique vector of equilibrium prices that is optimal in a suitable sense for the bidders in this paper we describe two dynamic auction mechanisms one achieves this equilibrium and the other approximates it to any desired degree of accuracy

a latent instrumental variables approach to modeling keyword conversion in paid search advertising abstract the authors present a modeling approach to assess the purchase conversion performance of individual keywords in paid search advertising the model facilitates estimation of daily keyword conversion and click through rates in a sparse data environment while accounting for the endogenous position of the text advertisement served in response to a search position endogeneity in paid search data can arise from both omitted variables and measurement error the authors propose a latent instrumental variable approach to address this problem they estimate their model on keyword level paid search data containing daily information on impressions clicks and reservations for a major lodging chain they find that higher positions increase both the click through and conversion rates when advertisements are served in higher positions approximately one third of new conversions is due to increased click through while approximately two thirds are due to increased conversion rates the authors show that the ke

keyword search advertising and first page bid estimates a strategic analysis in using the generalized second price gsp auction to sell advertising slots a search engine faces several challenges advertisers do not truthfully bid their valuations and the valuations are uncertain furthermore advertisers are budget constrained in this paper we analyze a stylized model of the first page bid estimate fpbe mechanism first developed by google and demonstrate its advantages in dealing with these challenges we show why and when the fpbe mechanism yields higher profits for the search engine compared with the traditional gsp auction and the gsp auction with advertiser specific minimum bid in the event that a high valuation advertiser is budget constrained the search engine can use the fpbe mechanism to alter the listing order with the intent of keeping the high valuation advertiser in the auction for a longer time the resulting increase in the search engine s profits is not necessarily at the expense of the advertisers because the combined profits of the advertisers and the search engine increase this paper was accepted by j miguel villas boas marketing

optimal bidding in multi item multislot sponsored search auctions we study optimal bidding strategies for advertisers in sponsored search auctions in general these auctions are run as variants of second price auctions but have been shown to be incentive incompatible thus advertisers have to be strategic about bidding uncertainty in the decision making environment budget constraints and the presence of a large portfolio of keywords makes the bid optimization problem nontrivial we present an analytical model to compute the optimal bids for keywords in an advertiser s portfolio to validate our approach we estimate the parameters of the model using data from an advertiser s sponsored search campaign and use the bids proposed by the model in a field experiment the results of the field implementation show that the proposed bidding technique is very effective in practice we extend our model to account for interactions between keywords in the form of positive spillovers from generic keywords into branded keywords the spillovers are estimated using a dynamic linear