Decision Sciences
4 years ago

New online advertising auction system revolutionizes billion-dollar keyword sales!

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American Economic Review
Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords
Benjamin Edelman, Michael Ostrovsky, Michael Schwarz

Paper Summary

The article explores how search engines sell online ads using a method called the generalized second-price auction (GSP). GSP is different from other auction methods and doesn't always lead to truthful bidding. By studying a related auction, researchers found that GSP has a unique equilibrium where all players get the same payoffs as in a different auction method.

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