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56
Adwords and generalized online matching
 In FOCS ’05: Proceedings of the 46th Annual IEEE Symposium on Foundations of Computer Science
, 2005
"... How does a search engine company decide what ads to display with each query so as to maximize its revenue? This turns out to be a generalization of the online bipartite matching problem. We introduce the notion of a tradeoff revealing LP and use it to derive two optimal algorithms achieving competit ..."
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Cited by 98 (5 self)
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How does a search engine company decide what ads to display with each query so as to maximize its revenue? This turns out to be a generalization of the online bipartite matching problem. We introduce the notion of a tradeoff revealing LP and use it to derive two optimal algorithms achieving competitive ratios of 1 − 1/e for this problem. 1
Competitive Auctions
, 2002
"... We study a class of singleround, sealedbid auctions for items in unlimited supply, such as digital goods. We introduce the notion of competitive auctions. A competitive auction is truthful (i.e., encourages buyers to bid their utility) and yields profit that is roughly within a constant factor of ..."
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Cited by 78 (10 self)
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We study a class of singleround, sealedbid auctions for items in unlimited supply, such as digital goods. We introduce the notion of competitive auctions. A competitive auction is truthful (i.e., encourages buyers to bid their utility) and yields profit that is roughly within a constant factor of the profit of optimal fixed pricing for all inputs. We justify the use of optimal fixed pricing as a benchmark for evaluating competitive auction profit. We show that several randomized auctions are truthful and competitive and that no truthful deterministic auction is competitive. Our results extend to bounded supply markets, for which we also get truthful and competitive auctions.
An analysis of alternative slot auction designs for sponsored search
 In Proceedings of the 7th ACM conference on Electronic commerce
, 2006
"... Billions of dollars are spent each year on sponsored search, a form of advertising where merchants pay for placement alongside web search results. Slots for ad listings are allocated via an auctionstyle mechanism where the higher a merchant bids, the more likely his ad is to appear above other ads ..."
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Cited by 69 (6 self)
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Billions of dollars are spent each year on sponsored search, a form of advertising where merchants pay for placement alongside web search results. Slots for ad listings are allocated via an auctionstyle mechanism where the higher a merchant bids, the more likely his ad is to appear above other ads on the page. In this paper we analyze the incentive, efficiency, and revenue properties of two slot auction designs: “rank by bid ” (RBB) and “rank by revenue” (RBR), which correspond to stylized versions of the mechanisms currently used by Yahoo! and Google, respectively. We also consider first and secondprice payment rules together with each of these allocation rules, as both have been used historically. We consider both the “shortrun ” incomplete information setting and the “longrun ” complete information setting. With incomplete information, neither RBB nor RBR are truthful with either first or second pricing. We find that the informational requirements of RBB are much weaker than those of RBR, but that RBR is efficient whereas RBB is not. We also show that no revenue ranking of RBB and RBR is possible given an arbitrary distribution over bidder values and relevance. With complete information, we find that no equilibrium exists with first pricing using either RBB or RBR. We show that there typically exists a multitude of equilibria with second pricing, and we bound the divergence of (economic) value in such equilibria from the value obtained assuming all merchants bid truthfully.
Knapsack Auctions
 Proceedings of the Seventeenth Annual ACMSIAM Symposium on Discrete Algorithms (SODA
, 2006
"... We consider a game theoretic knapsack problem that has application to auctions for selling advertisements on Internet search engines. Consider n agents each wishing to place an object in the knapsack. Each agent has a private valuation for having their object in the knapsack and each object has a pu ..."
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Cited by 56 (9 self)
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We consider a game theoretic knapsack problem that has application to auctions for selling advertisements on Internet search engines. Consider n agents each wishing to place an object in the knapsack. Each agent has a private valuation for having their object in the knapsack and each object has a publicly known size. For this setting, we consider the design of auctions in which agents have an incentive to truthfully reveal their private valuations. Following the framework of Goldberg et al. [10], we look to design an auction that obtains a constant fraction of the profit obtainable by a natural optimal pricing algorithm that knows the agents ’ valuations and object sizes. We give an auction that obtains a constant factor approximation in the nontrivial special case where the knapsack has unlimited capacity. We then reduce the limited capacity version of the problem to the unlimited capacity version via an approximately efficient auction (i.e., one that maximizes the social welfare). This reduction follows from generalizable principles. 1
Dynamics of bid optimization in online advertisement auctions
 In Proceedings of the 16th International World Wide Web Conference
, 2007
"... We consider the problem of online keyword advertising auctions among multiple bidders with limited budgets, and study a natural bidding heuristic in which advertisers attempt to optimize their utility by equalizing their returnoninvestment across all keywords. We show that existing auction mechani ..."
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Cited by 46 (2 self)
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We consider the problem of online keyword advertising auctions among multiple bidders with limited budgets, and study a natural bidding heuristic in which advertisers attempt to optimize their utility by equalizing their returnoninvestment across all keywords. We show that existing auction mechanisms combined with this heuristic can experience cycling (as has been observed in many current systems), and therefore propose a modified class of mechanisms with small random perturbations. This perturbation is reminiscent of the small timedependent perturbations employed in the dynamical systems literature to convert many types of chaos into attracting motions. We show that the perturbed mechanism provably converges in the case of firstprice auctions and experimentally converges in the case of secondprice auctions. Moreover, the point of convergence has a natural economic interpretation as the unique market equilibrium in the case of firstprice mechanisms. In the case of secondprice auctions, we conjecture that it converges to the “supplyaware” market equilibrium. Thus, our results can be alternatively described as a tâtonnement process for convergence to market equilibrium in which prices are adjusted on the side of the buyers rather than the sellers. We also observe that perturbation in mechanism design is useful in a broader context: In general, it can allow bidders to “share ” a particular item, leading to stable allocations and pricing for the bidders, and improved revenue for the auctioneer.
Allocating online advertisement space with unreliable estimates
 In Proceedings of the 8th ACM Conference on Electronic Commerce (EC
, 2007
"... We study the problem of optimally allocating online advertisement space to budgetconstrained advertisers. This problem was defined and studied from the perspective of worstcase online competitive analysis by Mehta et al. Our objective is to find an algorithm that takes advantage of the given estim ..."
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Cited by 44 (7 self)
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We study the problem of optimally allocating online advertisement space to budgetconstrained advertisers. This problem was defined and studied from the perspective of worstcase online competitive analysis by Mehta et al. Our objective is to find an algorithm that takes advantage of the given estimates of the frequencies of keywords to compute a near optimal solution when the estimates are accurate, while at the same time maintaining a good worstcase competitive ratio in case the estimates are totally incorrect. This is motivated by realworld situations where search engines have stochastic information that provide reasonably accurate estimates of the frequency of search queries except in certain highly unpredictable yet economically valuable spikes in the search pattern. Our approach is a blackbox approach: we assume we have access to an oracle that uses the given estimates to recommend an advertiser every time a query arrives. We use this oracle to design an algorithm that provides two performance guarantees: the performance guarantee in the case that the oracle gives an accurate estimate, and its worstcase performance guarantee. Our algorithm can be fine tuned by adjusting a parameter α, giving a tradeoff curve between the two performance measures with the best competitive ratio for the worstcase scenario at one end of the curve and the optimal solution for the scenario where estimates are accurate at the other end. Finally, we demonstrate the applicability of our framework by applying it to two classical online problems, namely the lost cow and the ski rental problems.
Sponsored Search Auctions with Markovian Users
"... Abstract. Sponsored search involves running an auction among advertisers who bid in order to have their ad shown next to search results for specific keywords. The most popular auction for sponsored search is the “Generalized Second Price ” (GSP) auction where advertisers are assigned to slots in the ..."
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Cited by 41 (3 self)
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Abstract. Sponsored search involves running an auction among advertisers who bid in order to have their ad shown next to search results for specific keywords. The most popular auction for sponsored search is the “Generalized Second Price ” (GSP) auction where advertisers are assigned to slots in the decreasing order of their score, which is defined as the product of their bid and clickthrough rate. One of the main advantages of this simple ranking is that bidding strategy is intuitive: to move up to a more prominent slot on the results page, bid more. This makes it simple for advertisers to strategize. However this ranking only maximizes efficiency under the assumption that the probability of a user clicking on an ad is independent of the other ads shown on the page. We study a Markovian user model that does not make this assumption. Under this model, the most efficient assignment is no longer a simple ranking function as in GSP. We show that the optimal assignment can be found efficiently (even in nearlinear time). As a result of the more sophisticated structure of the optimal assignment, bidding dynamics become more complex: indeed it is no longer clear that bidding more moves one higher on the page. Our main technical result is that despite the added complexity of the bidding dynamics, the optimal assignment has the property that ad position is still monotone in bid. Thus even in this richer user model, our mechanism retains the core bidding dynamics of the GSP auction that make it useful for advertisers. 1
The adwords problem: Online keyword matching with budgeted bidders under random permutations
 In Proc. 10th Annual ACM Conference on Electronic Commerge (EC
, 2009
"... We consider the problem of a search engine trying to assign a sequence of search keywords to a set of competing bidders, each with a daily spending limit. The goal is to maximize the revenue generated by these keyword sales, bearing in mind that, as some bidders may eventually exceed their budget, n ..."
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Cited by 39 (5 self)
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We consider the problem of a search engine trying to assign a sequence of search keywords to a set of competing bidders, each with a daily spending limit. The goal is to maximize the revenue generated by these keyword sales, bearing in mind that, as some bidders may eventually exceed their budget, not all keywords should be sold to the highest bidder. We assume that the sequence of keywords (or equivalently, of bids) is revealed online. Our concern will be the competitive ratio for this problem versus the offline optimum. We extend the current literature on this problem by considering the setting where the keywords arrive in a random order. In this setting we are able to achieve a competitive ratio of 1 − ɛ under some mild, but necessary, assumptions.
Multiunit auctions with budget limits
 In Proc. of the 49th Annual Symposium on Foundations of Computer Science (FOCS
, 2008
"... We study multiunit auctions where the bidders have a budget constraint, a situation very common in practice that has received very little attention in the auction theory literature. Our main result is an impossibility: there are no incentivecompatible auctions that always produce a Paretooptimal ..."
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Cited by 35 (5 self)
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We study multiunit auctions where the bidders have a budget constraint, a situation very common in practice that has received very little attention in the auction theory literature. Our main result is an impossibility: there are no incentivecompatible auctions that always produce a Paretooptimal allocation. We also obtain some surprising positive results for certain special cases. 1