Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Wednesday, November 29, 2017

Marketing Agencies and Collusive Bidding in Online Ad Auctions

Francesco Decarolis, Maris Goldmanis, and Antonio Penta explain Marketing Agencies and Collusive Bidding in Online Ad Auctions.

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.

http://lawprofessors.typepad.com/antitrustprof_blog/2017/11/marketing-agencies-and-collusive-bidding-in-online-ad-auctions.html

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