Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords
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)
Year of publication: |
2007
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Authors: | Edelman, Benjamin ; Ostrovsky, Michael ; Schwarz, Michael |
Published in: |
American Economic Review. - American Economic Association - AEA. - Vol. 97.2007, 1, p. 242-259
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Publisher: |
American Economic Association - AEA |
Saved in:
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