On Best-Response Bidding in GSP Auctions / Matthew Cary, Aparna Das, Benjamin Edelman, Ioannis Giotis, Kurtis Heimerl, Anna R. Karlin, Claire Mathieu, Michael Schwarz.

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Cary, Matthew

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w13788.Publication details: Cambridge, Mass. National Bureau of Economic Research 2008.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: How should players bid in keyword auctions such as those used by Google, Yahoo! and MSN? We model ad auctions as a dynamic game of incomplete information, so we can study the convergence and robustness properties of various strategies. In particular, we consider best-response bidding strategies for a repeated auction on a single keyword, where in each round, each player chooses some optimal bid for the next round, assuming that the other players merely repeat their previous bids. We focus on a strategy we call Balanced Bidding (bb). If all players use the bb strategy, we show that bids converge to a bid vector that obtains in a complete information static model proposed by Edelman, Ostrovsky and Schwarz (2007). We prove that convergence occurs with probability 1, and we compute the expected time until convergence.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w13788 (Browse shelf(Opens below))	Not For Loan

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February 2008.

How should players bid in keyword auctions such as those used by Google, Yahoo! and MSN? We model ad auctions as a dynamic game of incomplete information, so we can study the convergence and robustness properties of various strategies. In particular, we consider best-response bidding strategies for a repeated auction on a single keyword, where in each round, each player chooses some optimal bid for the next round, assuming that the other players merely repeat their previous bids. We focus on a strategy we call Balanced Bidding (bb). If all players use the bb strategy, we show that bids converge to a bid vector that obtains in a complete information static model proposed by Edelman, Ostrovsky and Schwarz (2007). We prove that convergence occurs with probability 1, and we compute the expected time until convergence.