Fast Core Pricing for Rich Advertising Auctions

Chicago Booth Research Paper No. 20-39

Operations Research, Forthcoming

51 Pages Posted: 21 Oct 2020 Last revised: 29 Oct 2020

See all articles by Rad Niazadeh

Rad Niazadeh

University of Chicago - Booth School of Business

Jason Hartline

affiliation not provided to SSRN

Nicole Immorlica

Microsoft Research

Mohammad Reza Khani

Amazon

Brendan Lucier

Microsoft Research

Date Written: October 13, 2020

Abstract

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) can yield unacceptably low revenue. We therefore study 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. Our main result is a combinatorial algorithm that finds an approximate bidder optimal core point with almost linear number of calls to the welfare maximization oracle. Our algorithm is faster than previously-proposed heuristics in the literature and has theoretical guarantees. We conclude that core pricing is implementable even for very time sensitive practical use cases such as realtime auctions for online advertising and can yield more revenue. We justify this claim experimentally using the Microsoft Bing Ad Auction data, through which we show our core pricing algorithm generates almost 26% more revenue than VCG on average, about 9% more revenue than other core pricing rules known in the literature, and almost matches the revenue of the standard Generalized Second Price (GSP) auction.

Keywords: Core-Selecting Auctions, Combinatorial Auctions, Package Auctions, VCG, Advertising Auction

Suggested Citation

Niazadeh, Rad and Hartline, Jason and Immorlica, Nicole and Khani, Mohammad Reza and Lucier, Brendan, Fast Core Pricing for Rich Advertising Auctions (October 13, 2020). Chicago Booth Research Paper No. 20-39, Operations Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3710328 or http://dx.doi.org/10.2139/ssrn.3710328

Rad Niazadeh (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S Woodlawn Ave
Chicago, IL 60637

HOME PAGE: http://radniazadeh.github.io/

Jason Hartline

affiliation not provided to SSRN

Nicole Immorlica

Microsoft Research ( email )

One Memorial Drive, 14th Floor
Cambridge, MA 02142
United States

Mohammad Reza Khani

Amazon ( email )

Seattle, WA 98144
United States

Brendan Lucier

Microsoft Research ( email )

One Memorial Drive, 14th Floor
Cambridge, MA 02142
United States

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