Predicting bounce rates in sponsored search advertisements
Proceedings of the 15th ACM SIGKDD international conference on Knowledge discovery and data mining
Mean field asymptotics of Markov decision evolutionary games and teams
GameNets'09 Proceedings of the First ICST international conference on Game Theory for Networks
Conversion rate based bid adjustment for sponsored search
Proceedings of the 19th international conference on World wide web
| Hi-index | 0.00 |
We study learning in a dynamic setting where identical copies of a good are sold over time through a sequence of second price auctions. Each agent in the market has an unknown independent private valuation which determines the distribution of the reward she obtains from the good; for example, in sponsored search settings, advertisers may initially be unsure of the value of a click. Though the induced dynamic game is complex, we simplify analysis of the market using an approximation methodology known as mean field equilibrium (MFE). The methodology assumes that agents optimize only with respect to long run average estimates of the distribution of other players' bids. We show a remarkable fact: in a mean field equilibrium, the agent has an optimal strategy where she bids truthfully according to a conjoint valuation. The conjoint valuation is the sum of her current expected valuation, together with an overbid amount that is exactly the expected marginal benefit to one additional observation about her true private valuation. Under mild conditions on the model, we show that an MFE exists, and that it is a good approximation to a rational agent's behavior as the number of agents increases. We conclude by discussing the implications of the auction format and design on the auctioneer's revenue. In particular, we establish a dynamic version of the revenue equivalence theorem, and discuss optimal selection of reserve prices in dynamic auctions.