Work

Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords

Year: 2007

Type: article

Abstract: We investigate the “generalized second-price” (GSP) auction, a new mechanism used by search engines to sell online advertising. Although GSP looks similar to the Vickrey-Clarke-Groves (VCG) mechanism, its properties are very different. Unlike the VCG mechanism, GSP generally does not have an equilibrium in dominant strategies, and truth-telling is not an equilibrium of GSP. To analyze the properties of GSP, we describe the generalized English auction that corresponds to GSP and show that it has a unique equilibrium. This is an ex post equilibrium, with the same payoffs to all players as the dominant strategy equilibrium of VCG. (JEL D44, L81, M37)

Source: American Economic Review

DOI: 10.1257/000282807780323523

Authors: Benjamin Edelman, Michael Ostrovsky, Michael Schwarz

Institutions: Harvard University, Stanford University, Yahoo (United States)

Language: English

Topic: Auction Theory and Applications

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3122305203

FWCI: 149.1

Cites: 48

Cited by: 1,778

Related to: 10