Dynamic Cost-Per-Action Mechanisms and Applications to Online Advertising

Hamid Nazerzadeh, Amin Saberi and Rakesh Vohra

No 1450, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: We examine the problem of allocating a resource repeatedly over time amongst a set of agents. The utility that each agent derives from consumption of the item is private information to that agent and, prior to consumption may be unknown to that agent. The problem is motivated by keyword auctions, where the resource to be allocated is a slot on a search page. We describe a mechanism based on a sampling-based learning algorithm that under suitable assumptions is asymptotically individually rational, asymptotically Bayesian incentive compatible and asymptotically ex-ante efficient. The mechanism can be interpreted as a cost per action keyword auction.

Keywords: dynamic auctions; sponsored search (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth
Date: 2007-07
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