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Dynamic stochastic modelling of online generalised second price auctions (GPS)

Dynamic stochastic modelling of online generalised second price auctions (GPS). N.Kudryashova,Cambridge University P. Key, Microsoft Research. How does the market of sponsored links operate?. User enters a query The auction for the link to appear on the search results page takes place

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Dynamic stochastic modelling of online generalised second price auctions (GPS)

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  1. Dynamic stochastic modelling of online generalised second price auctions (GPS) N.Kudryashova,Cambridge University P. Key, Microsoft Research

  2. How does the market of sponsored links operate? User enters a query The auction for the link to appear on the search results page takes place Advertisements of the highest bidders are displayed as sponsored links along the search results If the sponsored link is clicked upon the advertiser pays a provider for bringing the user to her webpage Advertiser submits a bid for slot for the targeted keywords Valuation (v) bid (u) bids are weighted by click through rates slots are assigned by weighted bid order Advertiser pays amount corresponding to a bid of the highest ranked competitor below her Generalized second price auction

  3. Sponsored Links in Search auctions Specifics: Multiple non-equivalent items are auctioned simultaneously Different definition of internet ad-unit for bidders and ad-platform Large number of bidders competing in large number of actions which cost very little Mean field approximation Markov Decision Process

  4. P. Key et al, working paper Decision Maker Unobservable Bidding with budgets )) cost Gain )) g(i) Value function:

  5. Optimal Control Theorem • From the point of the optimizing bidder, GSP can be interpreted as a stand-alone standard auction on which the bidder assigns a virtual valuation which is shaded down

  6. Mean field approximation simplifies models for online-bidding making optimization and control tractable • MFE exists for on-line single-slot bidding with budgets • MFE exists in special cases of online bidding without budgets constraints, but, in general, MFE may not exists • Outlook: Modelling beyond mean field

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