DIGITARISE

Ad auction simulator

InstrumentGeneralized second priceLive model
Advertiser A
Advertiser B
Advertiser C
Advertiser D
PosAdvertiserAd rank = bid × qualityPays
1B$2.50 × 820.0$2.41−4%
2C$3.20 × 619.2$2.68−16%
3A$4.00 × 416.0$2.26−44%
4D$1.80 × 59.0$0.51−72%

Advertiser B holds position 1 without the highest bid — quality is doing the work.

Instrument 01 — rank = bid × quality; each slot pays just enough to hold its position.

What the model shows

Most search advertising is sold through a generalized second-price auction with quality scoring. Each advertiser’s rank is its bid multiplied by a quality score; the amount actually paid per click is set by the advertiser below: (next ad rank ÷ your quality) + $0.01. Two consequences fall out of the mechanism, and both are visible in the instrument above: the winner almost never pays its own bid, and raising quality simultaneously lifts your rank and lowers your cost.

Drag Advertiser A’s quality slider upward and watch it overtake higher bidders without spending more — then watch every payment in the column re-derive. That is the auction doing exactly what it was designed to do: charging each slot the minimum needed to keep its position.

The full analysis — including where the mechanism’s incentives break down — is in Search ad auction rank and cost per click.