Equilibrium analysis of dynamic bidding in sponsored search auctions

  • Authors:
  • Yevgeniy Vorobeychik;Daniel M. Reeves

  • Affiliations:
  • Computer Science & Engineering, University of Michigan;Yahoo! Research

  • Venue:
  • WINE'07 Proceedings of the 3rd international conference on Internet and network economics
  • Year:
  • 2007

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Abstract

We analyze symmetric pure strategy equilibria in dynamic sponsored search auction games using simulations by restricting the strategies to several in a class introduced by Cary et al. [1]. We show that a particular convergent strategy also exhibits high stability to deviations. On the other hand, a strategy which yields high payoffs to all players is not sustainable in equilibrium play. Additionally, we analyze a repeated game in which each stage is a static complete-information sponsored search game. In this setting, we demonstrate a collusion strategy which yields high payoffs to all players and empirically show it to be sustainable over a range of settings.