scholarly journals Adverse Selection and Auction Design for Internet Display Advertising

2016 ◽  
Vol 106 (10) ◽  
pp. 2852-2866 ◽  
Author(s):  
Nick Arnosti ◽  
Marissa Beck ◽  
Paul Milgrom
Keyword(s):  
Adverse Selection ◽  
Auction Design ◽  
Display Advertising ◽  
Shill Bidding ◽  
Heavy Tailed Distributions ◽  
Price Auction ◽  
Second Price Auction ◽  
Heavy Tailed ◽  
The Cost ◽  
Second Price Auctions

We model an online display advertising environment in which “performance” advertisers can measure the value of individual impressions, whereas “brand” advertisers cannot. If advertiser values for ad opportunities are positively correlated, second-price auctions for impressions can be inefficient and expose brand advertisers to adverse selection. Bayesian-optimal auctions have other drawbacks: they are complex, introduce incentives for false-name bidding, and do not resolve adverse selection. We introduce “modified second bid” auctions as the unique auctions that overcome these disadvantages. When advertiser match values are drawn independently from heavy-tailed distributions, a modified second bid auction captures at least 94.8 percent of the first-best expected value. In that setting and similar ones, the benefits of switching from an ordinary second-price auction to the modified second bid auction may be large, and the cost of defending against shill bidding and adverse selection may be low. (JEL D44, D82, L86, M37)

scholarly journals Asymmetric Auctions with Resale

2008 ◽  
Vol 98 (1) ◽  
pp. 87-112 ◽  
Author(s):  
Isa Hafalir ◽  
Vijay Krishna
Keyword(s):  
Asymmetric Auctions ◽  
Monopoly Pricing ◽  
General Revenue ◽  
Private Values ◽  
Price Auction ◽  
Second Price Auction ◽  
Expected Revenue ◽  
Second Price Auctions ◽  
Independent Private Values

We study first- and second-price auctions with resale in a model with independent private values. With asymmetric bidders, the resulting inefficiencies create a motive for post-auction trade which, in our model, takes place via monopoly pricing—the winner makes a take-it-or-leave-it offer to the loser. We show (a) a first-price auction with resale has a unique monotonic equilibrium; and (b) with resale, the expected revenue from a first-price auction exceeds that from a second-price auction. The inclusion of resale possibilities thus permits a general revenue ranking of the two auctions that is not available when these are excluded. (JEL D44)

scholarly journals Entry Deterrence in Dynamic Second-Price Auctions

2016 ◽  
Vol 8 (2) ◽  
pp. 168-201
Author(s):  
Xiaogang Che ◽  
Tilman Klumpp
Keyword(s):  
Social Welfare ◽  
Entry Deterrence ◽  
Private Values ◽  
Price Auction ◽  
Second Price Auction ◽  
Second Price Auctions ◽  
Independent Private Values

We examine a dynamic second-price auction with independent private values and sequential costly entry. We show that delayed revelation equilibria exist in which some buyers place coordinated low early bids. These buyers revise their bids to reflect their true valuations just prior to the end of the auction. Compared to the benchmark immediate revelation equilibrium, in which buyers bid their valuations immediately after entry, fewer high-value bidders enter on expectation in the delayed revelation equilibria. Delayed revelation of buyer values decreases social welfare, but is necessary for bidders to have a strict participation incentive. (JEL D44, D82, D83)

EXPRESS: First-Price Auctions in Online Display Advertising

2021 ◽  
pp. 002224372110302
Author(s):  
Stylianos Despotakis ◽  
R. Ravi ◽  
Amin Sayedi
Keyword(s):  
Direct Access ◽  
Bidding Strategy ◽  
Unique Equilibrium ◽  
Old Regime ◽  
Display Advertising ◽  
Optimal Mechanism ◽  
Price Auction ◽  
Auction Format ◽  
Second Price Auctions

We link the rapid and dramatic move from second-price to first-price auction format in the display advertising market to the move from the waterfalling mechanism employed by publishers for soliciting bids in a pre-ordered cascade over exchanges, to an alternate header bidding strategy that broadcasts the request for bid to all exchanges simultaneously. First, we argue that the move by the publishers from waterfalling to header bidding was a revenue improving move for publishers in the old regime when exchanges employed second-price auctions. Given the publisher move to header bidding, we show that exchanges move from second-price to first-price auctions to increase their expected clearing prices. Interestingly, when all exchanges move to first-price auctions, each exchange faces stronger competition from other exchanges and some exchanges may end up with lower revenue than when all exchanges use second-price auctions; yet, all exchanges move to first-price auctions in the unique equilibrium of the game. We show that the new regime hinders the exchanges’ ability to differentiate in equilibrium. Furthermore, it allows the publishers to achieve the revenue of the optimal mechanism despite not having direct access to the advertisers.

Probability and Random Processes

2018 ◽  
Author(s):  
Stefan Thurner ◽  
Rudolf Hanel ◽  
Peter Klimekl
Keyword(s):  
Random Processes ◽  
Distribution Functions ◽  
Basic Logic ◽  
Heavy Tailed Distributions ◽  
Random Components ◽  
Classical Distribution ◽  
Heavy Tailed ◽  
Basic Facts ◽  
Stochastic Events ◽  
Stochastic Event

Phenomena, systems, and processes are rarely purely deterministic, but contain stochastic,probabilistic, or random components. For that reason, a probabilistic descriptionof most phenomena is necessary. Probability theory provides us with the tools for thistask. Here, we provide a crash course on the most important notions of probabilityand random processes, such as odds, probability, expectation, variance, and so on. Wedescribe the most elementary stochastic event—the trial—and develop the notion of urnmodels. We discuss basic facts about random variables and the elementary operationsthat can be performed on them. We learn how to compose simple stochastic processesfrom elementary stochastic events, and discuss random processes as temporal sequencesof trials, such as Bernoulli and Markov processes. We touch upon the basic logic ofBayesian reasoning. We discuss a number of classical distribution functions, includingpower laws and other fat- or heavy-tailed distributions.

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