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Discrete Choice Models of Bidder Behavior in Sponsored Search

  • Quang Duong
  • Sébastien Lahaie
Part of the Lecture Notes in Computer Science book series (LNCS, volume 7090)

Abstract

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.

Keywords

Discrete Choice Discrete Choice Model Bidder Behavior Quantal Response Equilibrium Discrete Choice Analysis 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  • Quang Duong
    • 1
  • Sébastien Lahaie
    • 2
  1. 1.University of MichiganAnn ArborUSA
  2. 2.Yahoo! ResearchNew YorkUSA

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