Bayes-Nash Equilibria in Generalized Second Price Auctions with Allocative Externalities

Abstract

In this paper, we investigate an incomplete information model of generalized second price auctions with allocative externalities originating from the heterogeneous match rates of bidders. A novel feature of our model is that it generates endogenous click-through rates (CTRs). In this setting, we establish existence of symmetric efficient equilibria for common classes of primitives. This contrasts with the findings of Gomes and Sweeney (2014), who study a similar model but with fixed CTRs. Moreover, non-existence results require strong assumptions on the primitives of the model. We conclude that existence of equilibria in GSP with incomplete information is quite general.