Department of Economics and Business - Universitat Pompeu Fabra

Title:: Marketing agencies and collusive bidding in online ad auctions
Authors:: Francesco Decarolis, Maris Goldmanis and Antonio Penta
Date:: April 2019
Abstract:: The transition of the advertising market from traditional media to the internet has induced a proliferation of marketing agencies specialized in bidding in the auctions that are used to sell ad space on the web. We analyze how collusive bidding can emerge from bid delegation to a common marketing agency and how this can undermine the revenues and allocative efficiency of both the Generalized Second Price auction (GSP, used by Google and Microsoft-Bing and Yahoo!) and the of VCG mechanism (used by Facebook). We find that, despite its well-known susceptibility to collusion, the VCG mechanism outperforms the GSP auction both in terms of revenues and efficiency.
Keywords:: Collusion, digital marketing agencies, facebook, google, GSP, internet auctions, online advertising, VCG
JEL codes:: C72, D44, L81.
Area of Research:: Microeconomics

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