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About this paper
Ruggiero Cavallo, Christopher A. Wilkens
This paper rigorously examines the Generalized Second Price (GSP) auction under a model of general, non-separable click-through-rates (CTRs), challenging the common separable assumption in sponsored search. It finds that while efficient equilibria can exist in two-slot settings, GSP's ability to achieve VCG outcomes and maintain a low Price of Anarchy is diminished, particularly in multi-slot scenarios.
Key insights
- The existence of efficient pure-strategy equilibria in GSP is surprisingly robust to non-separable CTRs in a two-slot setting, but this does not extend to the realization of VCG payments or a low Price of Anarchy.
- For three or more slots, the generic existence of efficient equilibria becomes problematic without specific bid-dependent tie-breaking rules, indicating a strong dependence on mechanism design details.
- Allowing expressive bidding, where agents can bid distinctly for each slot, can restore the VCG outcome as an equilibrium even in complex multi-slot settings with general CTRs.
Summary by alphaXiv.
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