Is Fair Advertising Good for Platforms?

Empirical evidence suggests that certain demographic groups are less likely to encounter online advertisements related to economic or educational opportunities, giving rise to fairness concerns. One reason for this discrepancy is that advertisers promoting economic (or educational) opportunities must compete for ad slots with other advertisers who place higher value in targeting certain specific demographic groups. In this paper, we theoretically study the implications of some popular ad auction policies proposed for minimizing this discrepancy. We explicitly account for how advertisers may strategically adjust their ad spending in response to these policies. We find that an Equal Treatment policy of simply forcing an economic opportunity advertiser to bid equally for all groups may prove counterproductive because it can weaken advertiser competition and worsen the disparities in some cases. Whereas, an Equal Exposure with Equal Treatment fairness policy that additionally requires the ad platform to artificially increase the bid or ad-budget of the economic opportunity advertiser to balance ad exposures across demographic groups may prove more effective. Interestingly, such a fairness policy may also increase ad platform revenue by promoting advertiser competition. Our results thus highlight that implementing fairness policies may in fact be in the interest of the ad platform.

History: Catherine Tucker served as the senior editor for this article. This paper has been accepted for the Marketing Science Special Section on DEI.

Supplemental Material: The online appendix is available at https://doi.org/10.1287/mksc.2023.0201.