Competing demand-side intermediary auctioneers in online advertising exchanges

We study the effects of competition among intermediary brokers that run local upstream auctions and participate at a central auction as bidders on behalf of their buyers. More specifically, we focus on the result of the choice of different mechanisms for the intermediaries on their profit, the central auctioneer’s revenue and the buyers’ surplus as well as the social welfare of all players both when the buyers are able to strategically select or not their intermediary broker. Our motivation stems from the area of online advertising with the introduction of ad exchanges, marketplaces that bring together buyers and sellers of advertising space and enable their trade by promoting the use of real-time auctions. However, our results are general and of relevance to the areas of procurement auctions with subcontracting, auctions with resale and auctions with colluding bidders.