A risk-free refinement of symmetric nash equilibrium in generalized second-price keyword auctions

Linjing Li, Jiesi Cheng, Daniel Zeng

Research output: Contribution to conferencePaper

Abstract

Symmetric Nash equilibrium is a well-known refinement of Nash equilibrium in the study of bidding behavior of online advertisers on the sponsored search advertising marketplace. This solution concept, however, has major limitations. It allows for over-bidding and has uncompelling upper bounds. In this paper, we propose a risk-free refinement of symmetric Nash equilibrium (RfSNE), to tackle these limitations. RfSNE can be determined by a bottom-up recursive algorithm. At an RfSNE, no advertiser is exposed to the risk of payoff loss caused by over-bidding. Managerially, RfSNE can be employed by search engines to help advertisers plan bidding strategy and the revenues realized on the set of RfSNEs can be used as a benchmark to evaluate alternative auction mechanisms.

Original languageEnglish (US)
StatePublished - Jan 1 2010
Event20th Annual Workshop on Information Technologies and Systems, WITS 2010 - St. Louis, MO, United States
Duration: Dec 11 2010Dec 12 2010

Other

Other20th Annual Workshop on Information Technologies and Systems, WITS 2010
CountryUnited States
CitySt. Louis, MO
Period12/11/1012/12/10

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Keywords

  • GSP
  • Keyword auction
  • Risk-free refinement
  • Symmetric Nash equilibrium

ASJC Scopus subject areas

  • Information Systems

Cite this

Li, L., Cheng, J., & Zeng, D. (2010). A risk-free refinement of symmetric nash equilibrium in generalized second-price keyword auctions. Paper presented at 20th Annual Workshop on Information Technologies and Systems, WITS 2010, St. Louis, MO, United States.