Showing papers by "Hal R. Varian published in 2016"

Causal inference in economics and marketing

Abstract: This is an elementary introduction to causal inference in economics written for readers familiar with machine learning methods. The critical step in any causal analysis is estimating the counterfactual—a prediction of what would have happened in the absence of the treatment. The powerful techniques used in machine learning may be useful for developing better estimates of the counterfactual, potentially improving causal inference.

The economics of Internet search

Abstract: Search engines are one of the most widely used Internet applications. Not only are search engines widely used, they are also highly profitable. Their primary source of revenue comes from selling advertisements that are related to the search queries. Since users tend to find these ads to be highly relevant to their interests, advertisers will pay well to place them. Furthermore, the marginal cost of an addition query is very low for search engines, so profit margins tend to be high. The fixed costs of entering and running a search engine were at one time substantial since the entrant was required to build or lease a data center. Nowadays, those fixed costs have become variable costs due to the availability of cloud computing services. This has enabled the proliferation of special purpose search engines that focus on particular types of searches such as travel and shopping. The most important economic factor determining search engine success is learning-by-doing. Because of the low user switching costs, search engines have to continually invest in improving both their search and their monetization. Though this could be said to be true of virtually any product, continuous improvement is particularly important in online products since pace of experimentation and implementation is particularly rapid.

The economics of Internet search

Abstract: This lecture provides an introduction to the economics of Internet search engines. After a brief review of the historical development of the technology and the industry, I describe some of the economic features of the auction system used for displaying ads. It turns out that some relatively simple economic models provide significant insight into the operation of these auctions. In particular, the classical theory of two-sided matching markets turns out to be very useful in this context.

Generating and using ad serving guarantees in an online advertising network

Abstract: An ad serving system accepts a request for one or more ads, determines a set of eligible ads from among ads having a guaranteed serving reservation and ads with uncommitted serving. This may be done using information from the accepted request, wherein the set of eligible ads may include at least one ad having a guaranteed serving reservation and at least one ad with uncommitted serving. A set of ads to serve is determined from the set of eligible ads using an arbitration process, and the determined set of ads is served. Ad serving guarantees may be generated and/or desired ad serving guarantees may be checked using an inventory test and/or a price test.