Strategic Bid Shading in Real-Time Bidding Auctions in Ad Exchange Using Minority Game Theory

Dipankar Das

Papers from arXiv.org

Abstract: Traditional auction theory posits that bid value exhibits a positive correlation with the probability of securing the auctioned object in ascending auctions. However, under uncertainty and incomplete information, as is characteristic in real-time advertising markets, truthful bidding may not always represent a dominant strategy or yield a Pure Strategy Nash Equilibrium. Real-Time Bidding (RTB) platforms operationalize impression-level auctions via programmatic interfaces, where advertisers compete in first-price auction settings and often resort to bid shading, i.e., strategically submitting bids below their private valuations to optimize payoff. This paper empirically investigates bid shading behaviors and strategic adaptation using large-scale RTB auction data from the Yahoo Webscope dataset. Integrating Minority Game Theory with clustering algorithms and variance-scaling diagnostics, we analyze equilibrium bidding behavior across temporally segmented impression markets. Our results reveal the emergence of minority-based bidding strategies, wherein agents partition hourly ad slots into submarkets and place bids strategically where they anticipate being in the numerical minority. This strategic heterogeneity facilitates reduced expenditure while enhancing win probability, functioning as an endogenous bid shading mechanism. The analysis highlights the computational and economic implications of minority strategies in shaping bidder dynamics and pricing outcomes in decentralized, high-frequency auction environments.

Date: 2025-12
References: Add references at CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2512.15717 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2512.15717

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().