Research Article
Robust Mechanisms for Sponsored Search
@INPROCEEDINGS{10.4108/eai.8-8-2015.2260361, author={Mohammad Mahdian and Mukund Sundararajan}, title={Robust Mechanisms for Sponsored Search}, proceedings={The Third Conference on Auctions, Market Mechanisms and Their Applications}, publisher={ACM}, proceedings_a={AMMA}, year={2015}, month={8}, keywords={sponsored search ad auctions online advertising mechanism design prior-free mechanism design}, doi={10.4108/eai.8-8-2015.2260361} }- Mohammad Mahdian
Mukund Sundararajan
Year: 2015
Robust Mechanisms for Sponsored Search
AMMA
ICST
DOI: 10.4108/eai.8-8-2015.2260361
Abstract
Sponsored search auctions sell ad positions (impressions) to advertisers on the event of a user query. The value of an advertiser for an ad position (impression), is the product of a private value per click, and a predicted click-through rate (PCTR) known to the auctioneer. A common mechanism for sponsored search auctions is to rank advertisers by their value. Lahaie and Pennock proposed a different ranking scheme based on "squashing'' the PCTRs by raising them to a power less than 1, and used numerical experiments to show that this method leads to increased revenue. In this paper, we prove that a modified form of squashing (called linear squashing) is approximately optimal for maximizing revenue in a model of sponsored search auctions that captures the fact that bid distributions are hard to estimate in a non-manipulable way.
