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2007
ACM

Dynamics of bid optimization in online advertisement auctions

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Dynamics of bid optimization in online advertisement auctions
We consider the problem of online keyword advertising auctions among multiple bidders with limited budgets, and study a natural bidding heuristic in which advertisers attempt to optimize their utility by equalizing their return-on-investment across all keywords. We show that existing auction mechanisms combined with this heuristic can experience cycling (as has been observed in many current systems), and therefore propose a modified class of mechanisms with small random perturbations. This perturbation is reminiscent of the small time-dependent perturbations employed in the dynamical systems literature to convert many types of chaos into attracting motions. We show that the perturbed mechanism provably converges in the case of first-price auctions and experimentally converges in the case of second-price auctions. Moreover, the point of convergence has a natural economic interpretation as the unique market equilibrium in the case of first-price mechanisms. In the case of second-price a...
Christian Borgs, Jennifer T. Chayes, Nicole Immorl
Added 21 Nov 2009
Updated 21 Nov 2009
Type Conference
Year 2007
Where WWW
Authors Christian Borgs, Jennifer T. Chayes, Nicole Immorlica, Kamal Jain, Omid Etesami, Mohammad Mahdian
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