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Media type:
E-Article
Title:
Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords
Contributor:
Edelman, Benjamin;
Ostrovsky, Michael;
Schwarz, Michael
Published:
American Economic Association, 2007
Published in:
American Economic Review, 97 (2007) 1, Seite 242-259
Language:
English
DOI:
10.1257/aer.97.1.242
ISSN:
0002-8282
Origination:
Footnote:
Description:
We investigate the “generalized second-price” (GSP) auction, a new mechanism used by search engines to sell online advertising. Although GSP looks similar to the Vickrey-Clarke-Groves (VCG) mechanism, its properties are very different. Unlike the VCG mechanism, GSP generally does not have an equilibrium in dominant strategies, and truth-telling is not an equilibrium of GSP. To analyze the properties of GSP, we describe the generalized English auction that corresponds to GSP and show that it has a unique equilibrium. This is an ex post equilibrium, with the same payoffs to all players as the dominant strategy equilibrium of VCG. (JEL D44, L81, M37)