26 research outputs found
MANAGING HETEROGENEITY IN SEARCH-ADVERTISERS’ OBJECTIVES
Utilization of search engines services is embedded in many people\u27s daily activities. However, consumers do not pay for these services, they are financed through sponsored search. The prevailing Generalized Second Price (GSP) auction mechanism, which is used by search engine service providers to allocate advertising slots to advertisers, who bid on keywords, only charges advertisers for clicks on their ads. Advertisers who seek exposure and do not want consumers to click on their ads, can manipulate search engines by designing ad content with low click through rates that accumulate free exposures.
This research-in-progress paper presents the motivation behind devising a sponsored search auction pricing mechanism that curtails advertisers\u27 exploitation of search engines, resulting in a better experience for consumers.
The paper analyzes the attributes of sponsored search and shows that the indirect payments by consumers do not necessarily lead to market failure, as opposed to other situations where advertisers sponsor information goods such as national commercial television broadcasting
Strongly Budget Balanced Auctions for Multi-Sided Markets
In two-sided markets, Myerson and Satterthwaite's impossibility theorem
states that one can not maximize the gain-from-trade while also satisfying
truthfulness, individual-rationality and no deficit. Attempts have been made to
circumvent Myerson and Satterthwaite's result by attaining
approximately-maximum gain-from-trade: the double-sided auctions of McAfee
(1992) is truthful and has no deficit, and the one by Segal-Halevi et al.
(2016) additionally has no surplus --- it is strongly-budget-balanced. They
consider two categories of agents --- buyers and sellers, where each trade set
is composed of a single buyer and a single seller. The practical complexity of
applications such as supply chain require one to look beyond two-sided markets.
Common requirements are for: buyers trading with multiple sellers of different
or identical items, buyers trading with sellers through transporters and
mediators, and sellers trading with multiple buyers. We attempt to address
these settings. We generalize Segal-Halevi et al. (2016)'s
strongly-budget-balanced double-sided auction setting to a multilateral market
where each trade set is composed of any number of agent categories. Our
generalization refines the notion of competition in multi-sided auctions by
introducing the concepts of external competition and trade reduction. We also
show an obviously-truthful implementation of our auction using multiple
ascending prices.Comment: Preliminary version accepted to AAAI 2020. This version adds (1)
External competition auction for arbitrary recipe vectors; (2)
Obvious-truthfulness proof; (3) Simulation experiment
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Gaming Prediction Markets: Equilibrium Strategies with a Market Maker
We study the equilibrium behavior of informed traders interacting with market scoring rule (MSR) market makers. One attractive feature of MSR is that it is myopically incentive compatible: it is optimal for traders to report their true beliefs about the likelihood of an event outcome provided that they ignore the impact of their reports on the profit they might garner from future trades. In this paper, we analyze non-myopic strategies and examine what information structures lead to truthful betting by traders. Specifically, we analyze the behavior of risk-neutral traders with incomplete information playing in a dynamic game. We consider finite-stage and infinite-stage game models. For each model, we study the logarithmic market scoring rule (LMSR) with two different information structures: conditionally independent signals and (unconditionally) independent signals. In the finite-stage model, when signals of traders are independent conditional on the state of the world, truthful betting is a Perfect Bayesian Equilibrium (PBE). Moreover, it is the unique Weak Perfect Bayesian Equilibrium (WPBE) of the game. In contrast, when signals of traders are unconditionally independent, truthful betting is not a WPBE. In the infinite-stage model with unconditionally independent signals, there does not exist an equilibrium in which all information is revealed in a finite amount of time. We propose a simple discounted market scoring rule that reduces the opportunity for bluffing strategies. We show that in any WPBE for the infinite-stage market with discounting, the market price converges to the fully-revealing price, and the rate of convergence can be bounded in terms of the discounting parameter. When signals are conditionally independent, truthful betting is the unique WPBE for the infinite-stage market with and without discounting.Engineering and Applied Science
An incentive-compatible multi-armed bandit mechanism
This paper presents a truthful sponsored search auction based on an incentive-compatible multi-armed bandit mechanism. The mechanism described combines several desirable traits. The mechanism gives advertisers the incentive to report their true bid, learns the click-through rate for advertisements, allows for slots with different quality, and loses the minimum welfare during the sampling process. The underlying generalization of the multi-armed bandit mechanism addresses the interplay between exploration and exploitation in an online setting that is truthful in high probability while allowing for slots of different quality. As the mechanism progresses the algorithm more closely approximates the hidden variables (click-though rates) in order to allocate advertising slots to the best advertisements. The resulting mechanism obtains the optimal welfare apart from a tightly bounded loss of welfare caused by the bandit sampling process. Of independent interest, in the field of economics it has long been recognized that preference elicitation is difficult to achieve, mainly as people are unaware of how much happiness a particular good will bring to them. In this paper we alleviate this problem somewhat by introducing a valuation-discovery process to the mechanism which results in a preference-elicitation mechanism for advertisers and search engines. 1