Revealed Preference and Welfare Considerations in Online Advertising Markets

We consider how textbook economic techniques should be applied in online advertising markets. We argue that the necessary conditions for revealed preference theory fail for most advertisers, due to incentive misalignments, ambiguity about available advertising opportunities, and fundamental challenges in estimating causal advertising effects. We also argue that some advertisers’ choices may reveal preferences, particularly those who pursue performance advertising objectives, buy their own medi