Fast Core Pricing for Rich Advertising Auctions

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.

Marketing Agencies and Collusive Bidding in Online Ad Auctions

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.

Evolutionary stability in the generalized second-price auction

The “generalized second-price auction” is widely employed to sell internet advertising positions and has many equilibria. Analysis of this auction has assumed that myopic players commonly know each others’ position values, and that the resulting equilibrium play is “locally envy-free”. Here, I argue that the appropriate refinement of Nash equilibrium for this setting is evolutionary stability, and show that it implies that an equilibrium is locally envy-free if the whole population of players bids in each auction and the set of possible bids is not too coarse. However, not all locally envy-free equilibria are evolutionarily stable in this case, as I show by example for the popular Vickrey–Clarke–Groves outcome. The existence of evolutionarily stable equilibrium is established when one position is auctioned, as well as for two positions and a large number of bidders.

On the Efficiency and Equilibria of Rich Ads

Search ads have evolved in recent years from simple text formats to rich ads that allow deep site links, rating, images and videos. In this paper, we consider a model where several slots are available on the search results page, as in the classic generalized second-price auction (GSP), but now a bidder can be allocated several consecutive slots, which are interpreted as a rich ad. As in the GSP, each bidder submits a bid-per-click, but the click-through rate (CTR) function is generalized from a simple CTR for each slot to a general CTR function over sets of consecutive slots. We study allocation and pricing in this model under subadditive and fractionally subadditive CTRs. We design and analyze a constant-factor approximation algorithm for the efficient allocation problem under fractionally subadditive CTRs, and a log-approximation algorithm for the subadditive case. Building on these results, we show that approximate competitive equilibrium prices exist and can be computed for subadditive and fractionally subadditive CTRs, with the same guarantees as for allocation.