Generalized second price auction is optimal for discrete types

Date

2016

Authors

Bayrak, H. I.
Pınar, M. Ç.

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Supervisor

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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

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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

Citation