Bid Coordination in Sponsored Search Auctions: Detection Methodology and Empirical Analysis

Open Access       

Authors: Francesco Decarolis, Maris Goldmanis, Antonio Penta and Ksenia Shakhgildyan

Journal of Industrial Economics, Vol. 71, No 2, 570 - 592, July, 2023

Bid delegation to specialized intermediaries is common in internet ad auctions. When the same intermediary bids for competing advertisers, its incentive to coordinate client bids might alter the functioning of the auctions. This study develops a methodology to detect bid coordination and presents a strategy to estimate a bound on the search engine revenue losses imposed by bid coordination. When the method is applied to data from auctions held on a major search engine, coordination is detected in 55% of the cases of delegated bidding and the search engine's revenue loss ranges between 5.3% and 10.4%.

This paper originally appeared as Barcelona School of Economics Working Paper 1258