The Competitor Busting Strategy in Keyword Auctions: Who's Worst Hit?

Abstract

Search engines award their advertising space through keyword auctions. Some bidders may adopt an aggressive bidding strategy known as Competitor Busting, where they submit higher bids than what is strictly needed to win the auction so as to oust the other bidders. Despite the widespread concern for such practice, we show that the Competitor Busting strategy is largely ineffective. The lifetime of non-aggressive bidders, their presence in the auction, and the proportion of slots they are awarded are not affected by the presence of aggressive bidders. These conclusions are valid as long as the aggressive bidders do not have a significant budget advantage over non-aggressive ones.