Refinement of symmetrical Nash equilibrium for generalized second-price mechanism in sponsored search advertising

Linjing Li, Dajun Zeng

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

Sponsored search advertising is the most prevailing online advertising instrument, also it is the most important and fastest-growing revenue source for auctioneers. In this paper, we propose a new type of equilibrium refinement concept named "stable Nash equilibrium" for this auction game. We illustrate that the set of all stable Nash equilibria (STNE) of a GSP mechanism keyword auction can be efficiently calculated by a recursive procedure. STNE is either the same as the set of the well-known symmetrical Nash equilibrium or a proper subset of it. These findings free both auctioneers and advertisers from complicated strategic thinking. The revenue of a GSP auction on STNE is at least the same as that of the classical V CG mechanism and can be used as a benchmark for evaluating other mechanisms. At the same time, STNE provides advertisers a simple yet effective and stable strategy.

Original languageEnglish (US)
Title of host publicationProceedings of 2010 IEEE International Conference on Service Operations and Logistics, and Informatics, SOLI 2010
Pages457-462
Number of pages6
DOIs
StatePublished - 2010
Event2010 IEEE International Conference on Service Operations and Logistics, and Informatics, SOLI 2010 - QingDao, China
Duration: Jul 15 2010Jul 17 2010

Other

Other2010 IEEE International Conference on Service Operations and Logistics, and Informatics, SOLI 2010
CountryChina
CityQingDao
Period7/15/107/17/10

Fingerprint

Price mechanism
Sponsored search
Search advertising
Nash equilibrium
Auctions
Revenue
Benchmark
Strategic thinking
Equilibrium refinements
Key words
Online advertising

ASJC Scopus subject areas

  • Information Systems and Management
  • Management Science and Operations Research

Cite this

Li, L., & Zeng, D. (2010). Refinement of symmetrical Nash equilibrium for generalized second-price mechanism in sponsored search advertising. In Proceedings of 2010 IEEE International Conference on Service Operations and Logistics, and Informatics, SOLI 2010 (pp. 457-462). [5551604] https://doi.org/10.1109/SOLI.2010.5551604

Refinement of symmetrical Nash equilibrium for generalized second-price mechanism in sponsored search advertising. / Li, Linjing; Zeng, Dajun.

Proceedings of 2010 IEEE International Conference on Service Operations and Logistics, and Informatics, SOLI 2010. 2010. p. 457-462 5551604.

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Li, L & Zeng, D 2010, Refinement of symmetrical Nash equilibrium for generalized second-price mechanism in sponsored search advertising. in Proceedings of 2010 IEEE International Conference on Service Operations and Logistics, and Informatics, SOLI 2010., 5551604, pp. 457-462, 2010 IEEE International Conference on Service Operations and Logistics, and Informatics, SOLI 2010, QingDao, China, 7/15/10. https://doi.org/10.1109/SOLI.2010.5551604
Li L, Zeng D. Refinement of symmetrical Nash equilibrium for generalized second-price mechanism in sponsored search advertising. In Proceedings of 2010 IEEE International Conference on Service Operations and Logistics, and Informatics, SOLI 2010. 2010. p. 457-462. 5551604 https://doi.org/10.1109/SOLI.2010.5551604
Li, Linjing ; Zeng, Dajun. / Refinement of symmetrical Nash equilibrium for generalized second-price mechanism in sponsored search advertising. Proceedings of 2010 IEEE International Conference on Service Operations and Logistics, and Informatics, SOLI 2010. 2010. pp. 457-462
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