Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcasts
  • About Us
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Cold Call Podcast
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    • COVID-19 Business Impact Center
      COVID-19 Business Impact Center
      Optimal Auction Design and Equilibrium Selection in Sponsored Search Auctions
      14 Jan 2010Working Paper Summaries

      Optimal Auction Design and Equilibrium Selection in Sponsored Search Auctions

      by Benjamin G. Edelman and Michael Schwarz
      Reserve prices may have an important impact on search advertising marketplaces. But the effect of reserve prices can be opaque, particularly because it is not always straightforward to compare "before" and "after" conditions. HBS professor Benjamin G. Edelman and Yahoo's Michael Schwarz use a pair of mathematical models to predict responses to reserve prices and understand which advertisers end up paying more. Key concepts include:
      • A search engine's optimal reserve price is independent of the number of bidders and also independent of the rate at which click-through rate declines over positions.
      • Most incremental revenue from setting reserve price optimally comes from the indirect effects on high bidders—not from the low bidder's direct effect, nor from indirect effects on other low bidders. This result may appear counter-intuitive because top bidders' large valuations place them, in an important sense, "furthest from" the reserve price.
      LinkedIn
      Email

      Author Abstract

      An abstract is unavailable at this time.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: January 2010
      • HBS Working Paper Number: 10-054
      • Faculty Unit(s): Negotiation, Organizations & Markets
        Trending
          • 08 Mar 2021
          • In Practice

          COVID Killed the Traditional Workplace. What Should Companies Do Now?

          • 02 Apr 2021
          • Research & Ideas

          Salary Negotiations: A Catch-22 for Women

          • 25 Feb 2019
          • Research & Ideas

          How Gender Stereotypes Kill a Woman’s Self-Confidence

          • 17 May 2017
          • Research & Ideas

          Minorities Who 'Whiten' Job Resumes Get More Interviews

          • 05 Apr 2021
          • What Do You Think?

          Why Can’t More Leaders Teach?

      Find Related Articles
      • Leadership
      • Negotiation
      • Strategy
      • Information Technology

      Sign up for our weekly newsletter

      Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
      ǁ
      Campus Map
      Harvard Business School Working Knowledge
      Baker Library | Bloomberg Center
      Soldiers Field
      Boston, MA 02163
      Email: Editor-in-Chief
      →Map & Directions
      →More Contact Information
      • Make a Gift
      • Site Map
      • Jobs
      • Harvard University
      • Trademarks
      • Policies
      • Digital Accessibility
      Copyright © President & Fellows of Harvard College