Soft Floors in Auctions

• 成果类型: Article
• 署名作者: Zeithammer, Robert
• 署名单位: University of California System; University of California Los Angeles
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2018.3164
• 发表日期: 2019
• 页码: 4204-4221
• 关键词: advertising and media; marketing: pricing; microeconomics: market structure and pricing

摘要

Several of the auction-driven exchanges that facilitate programmatic buying of internet display advertising have recently introduced soft floors in addition to standard reserve prices (called hard floors in the industry). A soft floor is a bid level below which a winning bidder pays his own bid instead of paying the second-highest bid as in a second-price auction most ad exchanges use by default. This paper characterizes soft floors' revenue-generating potential as a function of the distribution of bidder independent private values. When bidders are symmetric (identically distributed), soft floors have no effect on revenue, because a symmetric equilibrium always exists in strictly monotonic bidding strategies, and standard revenue-equivalence arguments thus apply. The industry often motivates soft floors as tools for extracting additional expected revenue from an occasional high bidder, for example a bidder retargeting the consumer making the impression. Such asymmetries in the distribution of bidder preferences do not automatically make soft floors profitable. This paper presents two examples of tractable modeling assumptions about such occasional high bidders, with one example implying low soft floors always hurt revenues because of strategic bid-shading by the regular bidders, and the other example implying high soft floors can increase revenues by making the regular bidders bid more aggressively.