Position auctions

I analyze the equilibria of a game based on the ad auction used by Google and Yahoo. This auction is closely related to the assignment game studied by Shapley-Shubik, Demange-Gale-Sotomayer and Roth-Sotomayer. However, due to the special structure of preferences, the equilibria of the ad auction can be calculated explicitly and some known results can be sharpened. I provide some empirical evidence that the Nash equilibria of the position auction describe the basic properties of the prices observed in Google's ad auction reasonably accurately.