DeepAI AI Chat
Log In Sign Up

ROI constrained Auctions

09/24/2018
by   Benamin Heymann, et al.
Criteo
0

A standard result from auction theory is that bidding truthfully in a second price auction is a weakly dominant strategy, or, in the language of digital advertising, 'the cost per mille (eCPM) is equal to the click through rate (CTR) times the cost per clicks (CPC)'. However, such assertion is incorrect if the buyers are subject to ROI constraints. More generally, several predictions derived by the traditional auction theory literature fail to apply. This is what I propose to discuss in this article. I formalize the notion of ROI constrained auctions and derive a Nash equilibrium for second price auctions. I then extend this result to any combination of first and second price payment rules and do an asymptotic analysis of the equilibrium as the number of bidders increases. Further I expose a revenue equivalence property, and finish with a proposal for a dynamic extension of the bidder ROI constrained optimization problem.

READ FULL TEXT

page 1

page 2

page 3

page 4

09/26/2018

k-price auctions and Combination auctions

We provide an exact analytical solution of the Nash equilibrium for k- p...
05/01/2018

Explicit shading strategies for repeated truthful auctions

With the increasing use of auctions in online advertising, there has bee...
03/30/2021

On-Chain Auctions with Deposits

Second-price auctions with deposits are frequently used in blockchain en...
10/20/2021

Learning New Auction Format by Bidders in Internet Display Ad Auctions

We study actual bidding behavior when a new auction format gets introduc...
06/22/2019

Bayesian Nash Equilibrium in First-Price Auction with Discrete Value Distributions

First price auctions are widely used in government contracts and industr...
08/04/2014

Computational Analysis of Perfect-Information Position Auctions

After experimentation with other designs, the major search engines conve...