Sponsored-Search Auctions: Empirical and Experimental Works

One of the most popular and rapidly growing directions of research in economics in the last decade is the analysis of online advertisement auctions. These auctions are of particular interest due to vast expansion of online advertisement market and new exiting possibilities for theoretical analysis of this market, especially from the mechanism design perspective. In this paper we offer a short survey of the most influential empirical works on the subject. The applied researcher or analyst in this market faces one of the two main challenges: which auction model and under what assumptions to choose for the analysis, and how to use existing models to explain or predict behavior of users and advertisers? Accordingly, in our survey we focus on the main papers that test assumptions of existing theoretical models, based on the real bidding data and experimentally. We also describe and discuss the most influential structural model, which allows to recover the main preference parameters, and which can be used to predict how the users and advertisers will change their behavior if the auction rules change. We also discuss possible directions for future research.