Simplified Mechanisms with Applications to Sponsored Search and Package Auctions
AbstractA simplified mechanism is a direct mechanism modified by restricting the set of reports or bids. An example is the auction used to place ads on Internet search pages, in which each advertiser bids a single price to determine the allocation of eight or more ad positions on a page. If a simplified mechanism satisfies the â€œbest-reply-closureâ€ property, then all Nash equilibria of the simplified mechanism are also equilibria of the original direct mechanism. For search advertising auctions, suitable simplifications eliminate inefficient, low-revenue equilibria that are favored in the original direct mechanism when bidding costs are positive.
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Date of creation: 03 Sep 2007
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- Paul Milgrom, 2007. "Simplified Mechanisms with Applications to Sponsored Search and Package Auctions," Discussion Papers, Stanford Institute for Economic Policy Research 07-008, Stanford Institute for Economic Policy Research.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
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