Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/271943 
Authors: 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10299
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
In this paper, I derive a new method to identify the distribution of the advertiser's ad-value in the sponsored search auction, explicitly looking at weighted Generalized Second Price auction (GSPw henceforth). Compared to previous literature, this method incorporates a weaker and more realistic assumption of 'incomplete information' on advertisers' private information. Additionally, I evaluate how much the advertisers shade their bid below their value, defined as bid shading amount. The results show that the bid shading is very small; the 50th percentile of the bid shading upper bound is below by 0.2% of their value. The low amount of bid shading is due to high competition intensity in the online ad market as the number of competing bids in the online ad market is very large. The bid shading calculation can also shed light on how the change of ad auction will impact the ad revenue.
Document Type: 
Working Paper
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