Externalities among advertisers in sponsored search

  • Authors:
  • Dimitris Fotakis;Piotr Krysta;Orestis Telelis

  • Affiliations:
  • School of Electrical and Computer Engineering, National Technical University of Athens, Athens, Greece;Department of Computer Science, University of Liverpool, Liverpool, UK;Department of Computer Science, University of Liverpool, Liverpool, UK

  • Venue:
  • SAGT'11 Proceedings of the 4th international conference on Algorithmic game theory
  • Year:
  • 2011

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Abstract

We introduce a novel computational model for single-keyword auctions in sponsored search, which models explicitly externalities among advertisers, an aspect that has not been fully reflected in the existing models, and is known to affect the behavior of real advertisers. Our model takes into account both positive and negative correlations between any pair of advertisers, so that the clickthrough rate of an ad depends on the identity, relative order and distance of other ads appearing in the advertisements list. In the proposed model we present several computational results concerning the Winner Determination problem for Social Welfare maximization. These include hardness of approximation and polynomial time exact and approximation algorithms. We conclude with an evaluation of the Generalized Second Price mechanism in presence of externalities.