Skewed Bidding in Pay-per-Action Auctions for Online Advertising

摘要

While PPA advertising appears appealing at first glance, it possesses a number of vulnerabilities. First, when action rates must be (for exogenous reasons) reported honestly, but firms have better estimates of action probabilities than the ad platform, the firms have an incentive to skew their bids. Skewed bidding allows a firm with a lower valuation to outbid one with a higher valuation. Since firm strategies depend on both the estimated and true action rates, in practice firms would have an incentive to expend resources to learn the true action rates if necessary. Generally, firms that have more precise estimates of them will see higher profits. In addition, risk aversion in the presence of misestimates reduces the profitability of advertising.