Calibrated Click-Through Auctions: An Information Design Approach

Dirk Bergemann, Paul Duetting, Renato Paes Leme and Song Zuo
Additional contact information
Paul Duetting: Google Research
Renato Paes Leme: Google Research
Song Zuo: Google Research

No 2285, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We analyze the optimal information design in a click-through auction with fixed valuations per click, but stochastic click-through rates. While the auctioneer takes as given the auction rule of the click-through auction, namely the generalized second-price auction, the auctioneer can design the information flow regarding the click-through rates among the bidders. A natural requirement in this context is to ask for the information structure to be calibrated in the learning sense. With this constraint, the auction needs to rank the ads by a product of the bid and an unbiased estimator of the click-through rates, and the task of designing an optimal information structure is thus reduced to the task of designing an optimal unbiased estimator. We show that in a symmetric setting with uncertainty about the click-through rates, the optimal information structure attains both social efficiency and surplus extraction. The optimal information structure requires private (rather than public) signals to the bidders. It also requires correlated (rather than independent) signals, even when the underlying uncertainty regarding the click-through rates is independent. Beyond symmetric settings, we show that the optimal information structure requires partial information disclosure.

Keywords: Click-Through Rates; Information Design; Second-Price Auction; Calibration; Private Signals; Public Signals; Conflation (search for similar items in EconPapers)
JEL-codes: D44 D47 D82 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2021-05
New Economics Papers: this item is included in nep-gth and nep-mic
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Published in the Proceedings of the ACM Web Conference 2022 (WWW ’22), April 25–29, 2022, Virtual Event, Lyon, France, (February 2022)

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