A dynamic model of bidding patterns in sponsored search auctions

Research output: Contribution to journalArticlepeer-review

6 Citations (Scopus)


We develop an infinite horizon alternative-move model of the unique second-price sponsored search auction. We use this model to explain two distinguishable bidding patterns observed in our bidding data: bidding war cycle and stable bid. With examples, we show that only a small portion of the value generated may be extracted by search engines, if advertisers are engaged in bidding war cycles. Finally, we show the impact of auction design on advertiser bids and search engine revenue.

Original languageEnglish
Pages (from-to)1-16
Number of pages16
JournalInformation Technology and Management
Issue number1
Publication statusPublished - Mar 2011
Externally publishedYes


  • Dynamic oligopoly
  • E-commerce
  • Sponsored search auction
  • Tacit collusion

ASJC Scopus subject areas

  • Information Systems
  • Communication
  • Business, Management and Accounting (miscellaneous)


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