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Simplified Mechanisms with Applications to Sponsored Search and Package Auctions

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  • Paul Milgrom

Abstract

A 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 “best-reply-closure” 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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Bibliographic Info

Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 122247000000001454.

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Date of creation: 03 Sep 2007
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Handle: RePEc:cla:levrem:122247000000001454

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  1. Lawrence M. Ausubel & Peter Crampton & Paul Milgrom, 2004. "The Clock-Proxy Auction: A Practical Combinatorial Auction Design," Discussion Papers 03-034, Stanford Institute for Economic Policy Research.
  2. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521551847, November.
  3. Lawrence M. Ausubel & Paul Milgrom, 2002. "Ascending Auctions with Package Bidding," Working Papers 02004, Stanford University, Department of Economics.
  4. Peter Cramton & Yoav Shoham & Richard Steinberg, 2004. "Combinatorial Auctions," Papers of Peter Cramton 04mit, University of Maryland, Department of Economics - Peter Cramton, revised 2004.
  5. Leo K. Simon and William R. Zame., 1987. "Discontinuous Games and Endogenous Sharing Rules," Economics Working Papers 8756, University of California at Berkeley.
  6. Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2005. "Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords," NBER Working Papers 11765, National Bureau of Economic Research, Inc.
  7. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February.
  8. Tjalling C. Koopmans & Martin J. Beckmann, 1955. "Assignment Problems and the Location of Economic Activities," Cowles Foundation Discussion Papers 4, Cowles Foundation for Research in Economics, Yale University.
  9. Estelle Cantillon & Martin Pesendorfer, 2006. "Auctioning bus routes: the London experience," ULB Institutional Repository 2013/9003, ULB -- Universite Libre de Bruxelles.
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