Header Bidding and Auctions with Intermediaries

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Abstract/Contents

Abstract: Widespread usage of real-time bidding to sell digital display advertising has ush- ered in new auction formats such as header bidding. Instead of ad exchanges directly auctioning ad slots, header bidding makes multiple ad exchanges compete in a unified auction run by the publisher. We model this “auction on auctions” and analyze the intermediary and bidder incentives to choose between different auction formats. First, we show that when an intermediary does not commit to a pricing rule but has certain restrictions on what it can charge, the optimal strategy for the bidders is the same as that in the first price auction. Second, when there are direct deals, there are also clear incentives for intermediaries to choose a first price auction. Finally, when the bidder can choose between participating with a first price intermediary and a second price intermediary, we give a condition on the private value distribution that induces participation with only the first price intermediary. These findings help explain a recent shift towards first price auctions in the real-time bidding industry.

Type of resource	text
Date created	May 3, 2018

Author	Wang, Michael
Primary advisor	Milgrom, Paul

Subject	ads
Subject	auctions
Subject	digital display advertising
Subject	header bidding
Subject	real-time bidding
Genre	Thesis

Related item	Title 2018 John G. Sobieski Award for Creative Thinking
Location	https://purl.stanford.edu/pj909rb2433

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License: This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).

Preferred Citation: Wang, Michael. (2018). Header Bidding and Auctions with Intermediaries. Stanford Digital Repository. Available at: https://purl.stanford.edu/pj909rb2433

Stanford University, Department of Economics, Honors Theses

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