A Quality-Based Auction for Search Ad Markets with Aggregators

We explore the role of aggregators in search ad markets and their effects on that marketplace. Aggregators can have positive effects similar to those of an arbitrageur. We argue and provide empirical evidence that, unlike arbitrageurs, aggregators can continue to profit even in the absence of price imbalances. Furthermore, we argue that the standard generalized second price (GSP) auction mechanisms create incentives for aggregators to design their sites to negatively affect the user experience and that the existence of aggregators in the marketplace can also negatively affect non-aggregator merchants. We propose a specific quality-based GSP mechanism that reduces the negative impacts of aggregators on the user and marketplace while allowing some of their positive benefits for users.

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In  ACM EC Workshop on Ad Auctions

Publisher  Association for Computing Machinery, Inc.
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