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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Identification Number : 10.1111/1756-2171.12050


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
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 16 Mar 2015 14:52
Last Modified: 27 Oct 2021 13:36
OAI Identifier: oai:tse-fr.eu:28762
URI: https://publications.ut-capitole.fr/id/eprint/16622
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