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Optimal auction design in two-sided markets

Gomes, Renato (2014) Optimal auction design in two-sided markets. RAND Journal of Economics, vol. 45 (n° 2). pp. 248-272.

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Official URL: http://tse-fr.eu/pub/28762

Abstract

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.

Item Type: Article
Language: English
Date: 2014
Refereed: Yes
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 16 Mar 2015 14:52
Last Modified: 24 Jan 2019 00:10
OAI ID: oai:tse-fr.eu:28762
URI: http://publications.ut-capitole.fr/id/eprint/16622

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