Best of Both Worlds Ad Contracts: Guaranteed Allocation and Price with Programmatic Efficiency

39 Pages Posted: 18 Dec 2017 Last revised: 28 Oct 2020

See all articles by Maxime C. Cohen

Maxime C. Cohen

Desautels Faculty of Management, McGill University

Antoine Désir


Nitish Korula

Google Inc.

Balasubramanian Sivan

Google Inc., New York

Date Written: December 15, 2017


Buying display ad impressions via real-time auctions comes with significant allocation and price uncertainties. We design and analyze a contract that mitigates this uncertainty risk by providing guaranteed allocation and prices, while maintaining the efficiency of buying in an auction. We study how risk aversion affects the desire for guarantees, and how to price a guaranteed allocation. We propose to augment the traditional auction---which can be either a sequence of auctions (first or second price) or a single-shot multi-unit auction---with a programmatic purchase option (which we call a Market-Maker contract) that removes allocation and price uncertainties. Instead of participating in the auction, advertisers can secure impressions in advance at a fixed premium price offered by the Market-Maker. It is then the responsibility of the Market-Maker to procure these impressions by bidding in the auction. We model buyers as risk-averse agents and analyze the equilibrium outcome when buyers face two purchase options (auction and Market-Maker contract). We derive analytical expressions for the Market-Maker price that reveal insightful relationships with uncertainties in the auction price and buyers' risk levels. We also show the existence of a Market-Maker price that simultaneously improves the seller's revenue and the sum of buyers' utilities. As a building block to our analysis, we establish the truthfulness of the multi-unit auction when buyers have non-quasilinear utilities due to risk aversion. Recently, the Google's Display & Video 360 platform started offering a product akin to Market-Maker, called Guaranteed Packages which was inspired by this paper.

Keywords: Online ads, guaranteed contracts, risk aversion, auctions, revenue management

Suggested Citation

Cohen, Maxime C. and Désir, Antoine and Korula, Nitish and Sivan, Balasubramanian, Best of Both Worlds Ad Contracts: Guaranteed Allocation and Price with Programmatic Efficiency (December 15, 2017). Available at SSRN: or

Maxime C. Cohen (Contact Author)

Desautels Faculty of Management, McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5

Antoine Désir

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex

Nitish Korula

Google Inc. ( email )

1600 Amphitheatre Parkway
Second Floor
Mountain View, CA 94043
United States

Balasubramanian Sivan

Google Inc., New York ( email )

111 8th Ave
New York, NY 10011
United States

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