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| Content Provider | Springer Nature Link |
|---|---|
| Author | Kim, Alex Balachander, Subramanian Kannan, Karthik |
| Copyright Year | 2012 |
| Abstract | In search advertising, a search engine uses a generalized second-price auction to sell advertising slots adjacent to search results on its webpage. In this paper, we study an interesting question related to the design of the generalized second-price auction: how should a search engine strategically decide on the number of advertising slots? To answer this question, we analyze the implication of varying the number of slots in a base model in which the click-through rates are assumed to be independent of the number of slots. When deciding the number of slots, we find that a search engine’s profit is based on two counteracting factors: the incremental clicks from an extra slot and the influence of the extra slot on advertisers’ payments per click. Our analysis characterizes the conditions for optimality of the number of slots and the implications of different distributions for advertiser valuations. We also extend the base model to allow for attraction and cannibalization of clicks from existing slots by new ad slots and show how such effects affect the optimal number of slots. Our overall results show that search engines need to optimize the number of ad slots offered for auction in order to maximize profit. |
| Starting Page | 851 |
| Ending Page | 868 |
| Page Count | 18 |
| File Format | |
| ISSN | 09230645 |
| Journal | Marketing Letters |
| Volume Number | 23 |
| Issue Number | 3 |
| e-ISSN | 1573059X |
| Language | English |
| Publisher | Springer US |
| Publisher Date | 2012-06-21 |
| Publisher Place | Boston |
| Access Restriction | One Nation One Subscription (ONOS) |
| Subject Keyword | Auctions Search advertising Generalized second-price auction Online advertising Marketing |
| Content Type | Text |
| Resource Type | Article |
| Subject | Business and International Management Economics and Econometrics Marketing |
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