General Second Price auction with price inflation
Date Issued
2016
Date
2016
Author(s)
Fu, Kuan-Chun
Abstract
Auction is a traditional process to sell items.Vickrey proposed the Vickrey auction in 1961.The general second price auction which sells multiple items is generalized from Vickrey auction.The general second price auction is a widely used mechanism for keyword auctions.Keyword auction which can earn lots of revenue plays an important role for the companies. (Google, Facebook, Microsoft and so on) The largest drawback for Vickrey and general second price is that the revenue could be much lower compared to other auction mechanisms.To increase the revenue and help the companies to make more money, an optimal mechanism is proposed by Myerson. An optimal mechanism is a mechanism that maximizes the expected revenues of the auctioneer. In single item auction, an optimal mechanism was obtained by Myerson with reserve price mechanism. Moreover, in single item auction, Fu et al. proposed the inflated mechanism helping to earn more revenue and Bulow and Klemperer proposed that adding one more bidder helping to earn more revenue.However, in the keyword auction which is a multiple advertising slots auction, optimal mechanism is an open problem.Edelman and Schwarz experimented the general second price auction with reserve price. Hence, we focous on general second price auction. First, we combine general second price auction with inflated price.Second, we combine the inflated price mechanism and reserve price mechanism into general second price auction.In our simulations and parameter setting, first, we compare the revenue between general second price auction and general second price auction with inflated price. We find that the revenue of general second price auction with inflated price 5% more than the revenue of general second price auction.Second, we compare the revenue between general second price auction with reserve price and general second price auction with inflated price and reserve price. We find that the revenue of general second price auction with inflated price and reserve price is 3% more than the revenue of general second price auction with reserve price. In summary, the thesis provided variant general second price auctions which can earn more revenue for auctioneer. In the variant general second price auctions, we proved there exist two equilibria. Moreover, we executed experiments and compare revenue under different factors.
Subjects
keyword auction
general second price auction
Vickrey auction
inflated price mechanism
reserve price mechanism
Type
thesis
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