Paper Info
Title
Soft Floors in Auctions.
Abstract
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.
Year
DOI
Venue
2019
10.1287/mnsc.2018.3164
MANAGEMENT SCIENCE
Keywords
Field
DocType
advertising and media,marketing: pricing,microeconomics: market structure and pricing
Economics,Advertising,Display advertising,Microeconomics,Common value auction,The Internet
Journal
Volume
Issue
ISSN
65
9
0025-1909
Citations 
PageRank 
References 
0
0.34
0
Authors
1
Name
Order
Citations
PageRank
Robert Zeithammer1315.11