Adverse Selection and Auction Design for Internet Display Advertising
summary
Paper proposes a concrete auction: if highest/second-highest bid > alpha the highest performance bidder wins and pays alpha·(second bid), otherwise a contracted brand ad wins; this modified second bid auction is anonymous, strategy-proof and false-name resistant and hence adverse selection free. Worst-case efficiency of both modified second bid and standard second-price with reserve is about 50%, but when match values follow power-law tails the modified rule recovers roughly ≈95% of omniscient welfare and about 94.8% of optimal revenue.
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chapters (8)
- 0:00Context of online advertising
- 4:26Defining ad categories
- 6:37The adverse selection risk
- 8:27Market design and models
- 11:51Mechanisms and benchmarks
- 19:31Modified second-bid auctions
- 26:08Performance and results
- 33:50Q&A and concluding thoughts
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