scholarly journals Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords

2007 ◽  
Vol 97 (1) ◽  
pp. 242-259 ◽  
Author(s):  
Benjamin Edelman ◽  
Michael Ostrovsky ◽  
Michael Schwarz
Keyword(s):  
Online Advertising ◽  
Dominant Strategy ◽  
Truth Telling ◽  
Vcg Mechanism ◽  
Strategy Equilibrium ◽  
Ex Post ◽  
Dominant Strategies ◽  
Price Auction ◽  
Second Price Auction ◽  
Generalized Second Price Auction

We investigate the “generalized second-price” (GSP) auction, a new mechanism used by search engines to sell online advertising. Although GSP looks similar to the Vickrey-Clarke-Groves (VCG) mechanism, its properties are very different. Unlike the VCG mechanism, GSP generally does not have an equilibrium in dominant strategies, and truth-telling is not an equilibrium of GSP. To analyze the properties of GSP, we describe the generalized English auction that corresponds to GSP and show that it has a unique equilibrium. This is an ex post equilibrium, with the same payoffs to all players as the dominant strategy equilibrium of VCG. (JEL D44, L81, M37)

scholarly journals Marketing Agencies and Collusive Bidding in Online Ad Auctions

2020 ◽  
Vol 66 (10) ◽  
pp. 4433-4454
Author(s):  
Francesco Decarolis ◽  
Maris Goldmanis ◽  
Antonio Penta
Keyword(s):  
Allocative Efficiency ◽  
The Internet ◽  
Traditional Media ◽  
Vcg Mechanism ◽  
Price Auction ◽  
Second Price Auction ◽  
Generalized Second Price Auction ◽  
Ad Auctions ◽  
Marketing Agency ◽  
The Web

The transition of the advertising market from traditional media to the internet has induced a proliferation of marketing agencies specialized in bidding in the auctions that are used to sell ad space on the web. We analyze how collusive bidding can emerge from bid delegation to a common marketing agency and how this can undermine the revenues and allocative efficiency of both the generalized second-price auction (GSP, used by Google, Microsoft Bing, and Yahoo!) and the Vickrey–Clarke–Groves (VCG) mechanism (used by Facebook). We find that despite its well-known susceptibility to collusion, the VCG mechanism outperforms the GSP auction in terms of both revenues and efficiency. This paper was accepted by Gabriel Weintraub, revenue management and market analytics.

scholarly journals Fast Core Pricing for Rich Advertising Auctions

2021 ◽  
Author(s):  
Rad Niazadeh ◽  
Jason Hartline ◽  
Nicole Immorlica ◽  
Mohammad Reza Khani ◽  
Brendan Lucier
Keyword(s):  
Theoretical Study ◽  
Online Advertising ◽  
Combinatorial Algorithm ◽  
Web Advertising ◽  
Welfare Maximization ◽  
Price Auction ◽  
Second Price Auction ◽  
Generalized Second Price Auction ◽  
Auction Formats ◽  
Vcg Auction

Standard ad auction formats do not immediately extend to settings where multiple size configurations and layouts are available to advertisers. In these settings, the sale of web advertising space increasingly resembles a combinatorial auction with complementarities, where truthful auctions such as the Vickrey–Clarke–Groves (VCG) auction can yield unacceptably low revenue. In “Fast Core Pricing for Rich Advertising Auctions,” Niazadeh, Hartline, Immorlica, Khani, and Lucier study and suggest core-selecting auctions, which boost revenue by setting payments so that no group of agents, including the auctioneer, can jointly improve their utilities by switching to a different outcome. Their main result is a combinatorial algorithm that finds an approximate bidder-optimal core point with an almost linear number of calls to the welfare-maximization oracle. This algorithm is faster than previously proposed heuristics in the literature and has theoretical guarantees. By accompanying the theoretical study with an experimental study based on Microsoft Bing Ad Auction data, the authors conclude that core pricing is implementable even for very time-sensitive practical use cases such as real-time online advertising and can yield more revenue than the VCG or generalized second price auction.

An Approach to Co-Dependent Value Based Internet Advertisement Auction

2013 ◽  
Vol 1 (2) ◽  
pp. 1-15 ◽  
Author(s):  
Satoshi Takahashi ◽  
Tokuro Matsuo ◽  
Roger Y. Lee
Keyword(s):  
Service Providers ◽  
Auction Mechanism ◽  
A Value ◽  
Internet Advertisement ◽  
Groves Mechanism ◽  
Price Auction ◽  
Second Price Auction ◽  
Generalized Second Price Auction ◽  
A Company ◽  
Mutually Independent

A structure of the Internet advertisement is that the service providers decide order of placement of many advertisements and advertising fees by auctions when advertisers offer their promotions. It is known that Generalized Second Price Auction (GSP) mechanism is the most efficient auction mechanism of the advertisement auction. Searching engine companies employ GSP mechanism basically. There are a lot of researches on GSP in order to analyze and clarify its feature and advantages. However, these researches assume that traded advertisements are mutually independent. That is means that each advertisement does not influence other advertisements. Also these researches do not consider a value of advertisement, which means some criterions of a name value of a company, effectiveness and an importance, that is dependently each other. This paper proposes a new advertisement auction mechanism based on GSP with considering the value of advertisement. The authors analyze the auctioneer's profit in comparison between normal GSP, normal VCG (Vickrey-Clarke-Groves Mechanism) and their proposed mechanism.

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