CFDP 2291

Selling Impressions: Efficiency vs. Competition

Author(s): 

Publication Date: July 2021

Pages: 36

Abstract: 

In digital advertising, a publisher selling impressions faces a trade-off in deciding how precisely to match advertisers with viewers. A more precise match generates efficiency gains that the publisher can hope to exploit. A coarser match will generate a thicker market and thus more competition. The publisher can control the precision of the match by controlling the amount of information that advertisers have about viewers. We characterize the optimal trade-off when impressions are sold by auction. The publisher pools premium matches for advertisers (when there will be less competition on average) but gives advertisers full information about lower quality matches.

Keywords: Second Price Auction, Conflation, Digital Advertising, Impressions, Bayesian Persuasion, Information Design

JEL Classification Codes: D44, D47, D83, D84

JEL Classification Codes: D44D47D83D84