2011 | OriginalPaper | Chapter
Discrete Choice Models of Bidder Behavior in Sponsored Search
Authors : Quang Duong, Sébastien Lahaie
Published in: Internet and Network Economics
Publisher: Springer Berlin Heidelberg
Activate our intelligent search to find suitable subject content or patents.
Select sections of text to find matching patents with Artificial Intelligence. powered by
Select sections of text to find additional relevant content using AI-assisted search. powered by
There are two kinds of bidders in sponsored search: most keep their bids static for long periods of time, but some do actively manage their bids. In this work we develop a model of bidder behavior in sponsored search that applies to both active and inactive bidders. Our observations on real keyword auction data show that advertisers see substantial variation in rank, even if their bids are static. This motivates a discrete choice approach that bypasses bids and directly models an advertiser’s (perhaps passive) choice of rank. Our model’s value per click estimates are consistent with basic theory which states that bids should not exceed values, even though bids are not directly used to fit the model. An empirical evaluation confirms that our model performs well in terms of predicting realized ranks and clicks.