Add Market Complications
http://www.businessinsider.com/google-chrome-ad-blocking-forces-ad-tech-cos-to-abandon-business-2017-10
In class, we have learned about selling advertisement slots to advertisers, with a one to one ration for each. However, we have never taken a more complicated approach to this topic, exploring different scenarios which could put kinks in the well oiled machine of the second price auction. In this article, it is shown that Google plans on banning certain types of adds, considered annoying to viewers, and putting limits on acceptable practices in advertisements. Doing this adds an extra layer of complication to the idea of matching which could change how advertisements are made and sold.
In the article it mentions different types of advertisements which would either be disallowed from being sold or having increased prices. As a result, before matching is done, the different modifiers, such as being removed from the process, or having a price modifier applied, must be added. In addition, it is important to think whether the price affects the way the matching occurs or not. Through some simple logic, we can see that the price should not affect the matching, and be applied afterwards.
If the price affects the value put forth for the advertiser using the modified add, then that advertiser would have a dominant strategy that negates the effect of the price. If the advertiser has a value for an add of x, and the price for that type of add is y, then the advertiser would not bid his value. Bidding his value would end up causing him to have a bid higher than his value, which could lead to him paying more than he desires, and losing value overall. Instead he should bid x-y, which results in the same thing as bidding his value with no additional price. As a result, the price must be payed after matching is decided.
If that is the case, however, it would still have an effect on how the bidding is done. Bidding the real value is still not optimal, because if that ends up being the amount the advertiser pays, the additional price would push the amount payed past the total value of the advertising slot. Instead, they must bid low enough that the difference in price of the bidding slot is less then or equal to the price.