An analysis of alternative slot auction designs for sponsored search
EC '06 Proceedings of the 7th ACM conference on Electronic commerce
Bayes-nash equilibria of the generalized second price auction
Proceedings of the 10th ACM conference on Electronic commerce
Automated online mechanism design and prophet inequalities
AAAI'07 Proceedings of the 22nd national conference on Artificial intelligence - Volume 1
Multi-parameter mechanism design and sequential posted pricing
Proceedings of the forty-second ACM symposium on Theory of computing
Pure and Bayes-Nash Price of Anarchy for Generalized Second Price Auction
FOCS '10 Proceedings of the 2010 IEEE 51st Annual Symposium on Foundations of Computer Science
Reserve prices in internet advertising auctions: a field experiment
Proceedings of the 12th ACM conference on Electronic commerce
GSP auctions with correlated types
Proceedings of the 12th ACM conference on Electronic commerce
On the efficiency of equilibria in generalized second price auctions
Proceedings of the 12th ACM conference on Electronic commerce
On revenue in the generalized second price auction
Proceedings of the 21st international conference on World Wide Web
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Sponsored search auctions are the main source of revenue for search engines. In such an auction, a set of utility-maximizing advertisers compete for a set of ad slots. The assignment of advertisers to slots depends on bids they submit; these bids may be different than the true valuations of the advertisers for the slots. Variants of the celebrated VCG auction mechanism guarantee that advertisers act truthfully and, under mild assumptions, lead to revenue or social welfare maximization. Still, the sponsored search industry mostly uses generalized second price (GSP) auctions; these auctions are known to be non-truthful and suboptimal in terms of social welfare and revenue. In an attempt to explain this tradition, we study a Bayesian setting where the valuations of advertisers are drawn independently from a regular probability distribution. In this setting, it is well known by the work of Myerson (1981) that the optimal revenue is obtained by the VCG mechanism with a particular reserve price that depends on the probability distribution. We show that by appropriately setting the reserve price, the revenue over any Bayes-Nash equilibrium of the game induced by the GSP auction is at most a small constant fraction of the optimal revenue, improving recent results of Lucier, Paes Leme, and Tardos (2012). Our analysis is based on the Bayes-Nash equilibrium conditions and on the properties of regular probability distributions .