Advertisers are Irrational

I’ve learn a lot from what Herb Simon, Danny Kahneman, and others tell us about the fallacy of assuming that human behavior conforms to unbounded–or even bounded–rationality. But it’s always nice to see reminders in real-world scenarios, especially ones where real money is at stake.

If you enjoy this topic, I recommend Greg Linden’s post: “Are advertisers rational?“. Or, if you’re up for it, read the original paper by Jason Auerback, Joel Galenson, and Mukund Sundararajan: “An Empirical Analysis of Return on Investment Maximization in Sponsored Search Auctions“.

By Daniel Tunkelang

High-Class Consultant.