Optimal Mechanisms for a Value Maximizer : The Futility of Screening Targets
Motivated by the increased adoption of autobidding algorithms in internet advertising markets, we study the design of optimal mechanisms for selling items to a value-maximizing buyer with a return-on-spend constraint. The buyer's values and target ratio in the return-on-spend constraint are private. We restrict attention to deterministic sequential screening mechanisms that can be implemented as a menu of two-part tariffs. The main result of this paper is to provide a characterization of an optimal mechanism. Surprisingly, we show that the optimal mechanism does not require target screening, i.e., offering a single two-part tariff is optimal for the seller. The optimal mechanism is a subsidized two-part tariff that provides a lump-sum subsidy to the buyer to encourage participation and then charges a fixed unit price for each item sold. The seller's problem is a challenging non-linear mechanism design problem, and a key technical contribution of our work is to provide a novel approach to analyzing non-linear pricing contracts for constrained buyers. Our results have valuable implications for advertising platforms seeking to personalize pricing decisions based on advertisers' characteristics
Year of publication: |
2023
|
---|---|
Authors: | Balseiro, Santiago ; Deng, Yuan ; Mao, Jieming ; Mirrokni, Vahab ; Zuo, Song |
Publisher: |
[S.l.] : SSRN |
Saved in:
freely available
Extent: | 1 Online-Ressource (31 p) |
---|---|
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 1, 2023 erstellt |
Other identifiers: | 10.2139/ssrn.4351927 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10014255713
Saved in favorites
Similar items by person
-
The Landscape of Auto-Bidding Auctions : Value Versus Utility Maximization
Balseiro, Santiago, (2021)
-
Optimal Mechanisms for Value Maximizers with Budget Constraints via Target Clipping
Balseiro, Santiago, (2022)
-
Non-Clairvoyant Dynamic Mechanism Design with Budget Constraints and Beyond
Deng, Yuan, (2019)
- More ...