Balocco, F., Lu, Y., Li, T. and Gupta, A. (2025). Lemon Ads: Adverse Selection in Multichannel Display Advertising Markets Management Science, 71(12):vii--x, 9869--10753, iv--vi.

Two auction-based channels play a crucial role in facilitating transactions of ad impressions in display advertising: real-time bidding (RTB), which is accessible to all advertisers, and private marketplace (PMP), which is restricted to a select group of advertisers through invitation-based agreements with publishers. Despite the ongoing discourse on the benefits and drawbacks of these two channels, how their coexistence influences the market dynamics and outcomes remains an open question. In this paper, we investigate this question by focusing on the welfare implications of publishers{\textquoteright} channel adoption. First, using a game-theoretic model, we show that publishers who use both RTB and PMP can leverage their private information on impression quality to sell lower-quality impressions at higher prices in RTB, leading to adverse selection and exposing their RTB-only counterparts to losses. To validate our theoretical prediction, we conduct an empirical analysis using a large proprietary data set. The results provide strong evidence of the presence of adverse selection. In particular, we find that, all else being equal, RTB impressions from dual-channel publishers are of significantly lower quality compared with those from single-channel publishers. Our findings shed light on the nuanced dynamics between RTB and PMP and contribute to the understanding of the complex interplay of informational and strategic factors in the display advertising market.