Generalized second price auction is optimal for discrete types
Date
2016
Authors
Bayrak, H. I.
Pınar, M. Ç.
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Source Title
Economics Letters
Print ISSN
0165-1765
Electronic ISSN
1873-7374
Publisher
Elsevier
Volume
141
Issue
Pages
35 - 38
Language
English
Type
Journal Title
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Abstract
We prove that a variant of the second price auction for the sale of a single good through a Bayesian incentive compatible mechanism that maximizes expected revenue of the seller is optimal when the type space is discrete. Moreover, we show that this variant is related to the widely used generalized second price auction mechanism in keyword-auctions for advertising, thus providing a theoretical justification for a practical tool.
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Keywords
Implementation, Linear programming, Online advertising, Optimal auction design, Second price auction with reserve, Submodular functions