AI

When Does Improved Targeting Increase Revenue?

Abstract

In second-price auctions, we find that improved targeting via enhanced information disclosure decreases revenue when there are two bidders and increases revenue if there are at least four symmetric bidders with values drawn from a distribution with a monotone hazard rate. With asymmetries, improved targeting increases revenue if the most frequent winner wins less than 30.4% of the time under a model in which shares are well defined, but can decrease revenue otherwise. We derive analogous results for position auctions. Finally, we show that revenue can vary nonmonotonically with the number of bidders who are able to take advantage of improved targeting.