Abstract
Privacy protection measures in online markets have ramped up in recent years, typified by both government initiatives, as well as firm-level actions such as designing web browsers which block “third-party cookies” by default. We estimate a structural model of auctions in online advertising using bid-level auction data from Yahoo. Then we simulate several counterfactual scenarios, focusing on evaluating the likely effects of Google’s announced plan, starting in 2023, to block third-party cookies by default on Chrome, its market-leading browser. We find that such a ban would reduce publisher revenue by 45%, and bidder (advertiser) surplus by 35%. Moreover, our simulations also indicate that, amidst a third-party cookie ban, bidders who are able to leverage their informational advantage on users can gain surplus from the ban.
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