Effects of budget and competition on search engine advertising

One of the significant challenges marketers face nowadays is attempting to optimize their advertising strategies under a given budget constraint. As dominant bidding environments such as Google, Yahoo, etc., allow publishers to allocate positions in online advertising, budget constraints influence bidding strategy by inducing advertisers to deplete the budgets of higher-ranked competitors in order to gain premier positions. This strategic consideration has an impact on the profits of advertisers, especially when the competition is intense. Determining equilibrium strategies is vital for the advertiser and all parties involved in the problem. With the obtained bidding strategy, each advertiser is expected to allocate their budget effectively and attract customers with measurable returns. This thesis studies the above problem in terms of finding optimal strategies for search engine advertising with budget constraints and competitors' interactions. Unlike similar studies in the literature, instead of solving an optimization problem with a single decision-maker, a game theory problem specified in the Nash equilibrium will be considered with all the competitors in the environment. In this respect, the paper is expected to fill the gap in the literature while making a practical impact on the search engine advertising market.