Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords
22 Pages Posted: 8 Feb 2006 Last revised: 26 Aug 2022
There are 2 versions of this paper
Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords
Date Written: November 2005
Abstract
We investigate the "generalized second price" auction (GSP), a new mechanism which is used by search engines to sell online advertising that most Internet users encounter daily. GSP is tailored to its unique environment, and neither the mechanism nor the environment have previously been studied in the mechanism design literature. Although GSP looks similar to the Vickrey-Clarke-Groves (VCG) mechanism, its properties are very different. In particular, 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 in a dynamic environment, we describe the generalized English auction that corresponds to the GSP and show that it has a unique equilibrium. This is an ex post equilibrium that results in the same payoffs to all players as the dominant strategy equilibrium of VCG.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Dirk Bergemann and Stephen Morris
-
By Dirk Bergemann and Stephen Morris
-
Robust Mechanism Design: An Introduction
By Dirk Bergemann and Stephen Morris
-
By Benjamin G. Edelman, Michael Ostrovsky, ...
-
Robust Implementation: The Role of Large Type Spaces
By Dirk Bergemann and Stephen Morris
-
By Ehud Kalai
-
By Dirk Bergemann and Stephen Morris
-
Efficient Auction Mechanisms with Interdependent Valuations and Multidimensional Signals
-
On Equilibrium in Pure Strategies in Games with Many Players