Pricing in Position Auctions and Online Advertising∗

This paper analyzes position auctions with general pricing rules. In these auctions, there are several items to be allocated which are commonly ranked by agents with unit demand. The preeminent example of position auctions is the “generalized second-price” (GSP) auction used by major search engines to sell online advertising. Edelman et al. (2007) establish that the ex post equilibrium of the GSP auction and the dominant strategy equilibrium of the Vickrey-Clarke-Groves mechanism have identical ex post payoffs. I extend their result to ascending auctions with general pricing rules where the price for an item depends on the bids of agents who win lower ranked items in any “sensible” way, even if the agents have multidimensional types. JEL: C71, C78.