Online Advertisement Allocation under Customer Choices and Algorithmic Fairness

Forthcoming at Management Science

63 Pages Posted: 16 Mar 2020 Last revised: 7 Dec 2023

See all articles by Xiaolong Li

Xiaolong Li

National University of Singapore (NUS) - Institute of Operations Research and Analytics

Ying Rong

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Renyu (Philip) Zhang

The Chinese University of Hong Kong

Huan Zheng

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Date Written: September 25, 2022

Abstract

Advertising is a crucial revenue source for e-commerce platforms and a vital online marketing tool for their sellers. In this paper, we explore dynamic ad allocation with limited slots upon each customer arrival for an e-commerce platform, where customers follow a choice model when clicking the ads. Motivated by the recent advocacy for the algorithmic fairness of online ad delivery, we adjust the value from advertising by a general fairness metric evaluated with the click-throughs of different ads and customer types. The original online ad-allocation problem is intractable, so we propose a novel stochastic program framework (called two-stage target-debt, TTD) that first decides the click-through targets then devises an ad-allocation policy to satisfy these targets in the second stage. We show the asymptotic equivalence between the original problem, the relaxed click-through target optimization, and the fluid-approximation (Fluid) convex program. We also design a debt-weighted offer-set (DWO) algorithm and demonstrate that, as long as the problem size scales to infinity, this algorithm is (asymptotically) optimal under the optimal first-stage click-through target. Compared to the Fluid heuristic and its re-solving variants, our approach has better scalability and can deplete the ad budgets more smoothly throughout the horizon, which is highly desirable for the online advertising business in practice. Finally, our proposed model and algorithm help substantially improve the fairness of ad allocation for an online e-commerce platform without significantly compromising efficiency.

Keywords: Online Advertising Platform, Choice Models, Algorithmic Fairness, Online Convex Optimization

Suggested Citation

Li, Xiaolong and Rong, Ying and Zhang, Renyu and Zheng, Huan, Online Advertisement Allocation under Customer Choices and Algorithmic Fairness (September 25, 2022). Forthcoming at Management Science, Available at SSRN: https://ssrn.com/abstract=3538755 or http://dx.doi.org/10.2139/ssrn.3538755

Xiaolong Li

National University of Singapore (NUS) - Institute of Operations Research and Analytics ( email )

Innovation 4.0, #04-01, 3 Research Link
117602
Singapore

Ying Rong

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

Renyu Zhang (Contact Author)

The Chinese University of Hong Kong ( email )

Shatin, N.T.
Hong Kong, Hong Kong
China

HOME PAGE: http://rphilipzhang.github.io/rphilipzhang/index.html

Huan Zheng

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

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