Generalized second price auction is optimal for discrete types

Halil I. Bayrak and Mustafa Ç. Pınar

Economics Letters, 2016, vol. 141, issue C, 35-38

Abstract: We prove that a variant of the second price auction for the sale of a single good through a Bayesian incentive compatible mechanism that maximizes expected revenue of the seller is optimal when the type space is discrete. Moreover, we show that this variant is related to the widely used generalized second price auction mechanism in keyword-auctions for advertising, thus providing a theoretical justification for a practical tool.

Keywords: Optimal auction design; Second price auction with reserve; Linear programming; Submodular functions; Implementation; Online advertising (search for similar items in EconPapers)
JEL-codes: C61 D44 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:141:y:2016:i:c:p:35-38

DOI: 10.1016/j.econlet.2016.01.019

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