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ABSTRACT

We propose a keyword auction protocol called the Generalized Second Price with an Exclusive Right (GSP-ExR). In existing keyword auctions, the number of displayed advertisements is determined in advance. Thus, we consider adjusting the number of advertisements dynamically based on bids. In the GSP-ExR, the number of slots can be either 1 or K. When K slots are displayed, the protocol is identical to the GSP. If the value per click of the highest ranked bidder is large enough, then this bidder can exclusively display her advertisement by paying a premium. Thus, this pricing scheme is relatively simple and seller revenue is at least as good as the GSP. Also, in the GSP-ExR, the highest ranked bidder has no incentive to change the number of slots by over/under-bidding as long as she retains the top position.

REFERENCES

• 1: Matthew Cary , Aparna Das , Ben Edelman , Ioannis Giotis , Kurtis Heimerl , Anna R. Karlin , Claire Mathieu , Michael Schwarz, Greedy bidding strategies for keyword auctions, Proceedings of the 8th ACM conference on Electronic commerce, June 11-15, 2007, San Diego, California, USA [doi>10.1145/1250910.1250949]
• 2: B. Edelman, M. Ostrovsky, and M. Schwarz. Internet advertising and the generalized second price auction: Selling billions of dollars worth of keywords. American Economic Review, 97:242--259, 2007.
• 3: Sébastien Lahaie , David M. Pennock, Revenue analysis of a family of ranking rules for keyword auctions, Proceedings of the 8th ACM conference on Electronic commerce, June 11-15, 2007, San Diego, California, USA [doi>10.1145/1250910.1250918]
• 4: Matthew Richardson , Ewa Dominowska , Robert Ragno, Predicting clicks: estimating the click-through rate for new ads, Proceedings of the 16th international conference on World Wide Web, May 08-12, 2007, Banff, Alberta, Canada [doi>10.1145/1242572.1242643]
• 5: H. R. Varian. Position auctions. International Journal of Industrial Organization, 25(6):1163--1178, 2007.

INDEX TERMS

Primary Classification:
  I. Computing Methodologies
  I.2 ARTIFICIAL INTELLIGENCE
        I.2.11 Distributed Artificial Intelligence

General Terms:
Economics, Theory

Keywords:
electronic commerce, keyword auction, mechanism design, web advertising