Name
Abstract | ||
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Ad Exchanges are emerging Internet markets where advertisers may purchase display ad placements, in real-time and based on specific viewer information, directly from publishers via a simple auction mechanism. Advertisers join these markets with a prespecified budget and participate in multiple second-price auctions over the length of a campaign. This paper studies the competitive landscape that arises in Ad Exchanges and the implications for publishers' decisions.
Our first main contribution is to introduce the novel notion of a Fluid Mean Field Equilibrium (FMFE) to study the interactions among budget-constrained bidders in an Ad Exchange. This new solution concept is behaviorally appealing, computationally tractable, and in some important cases yields a closed-form characterization. Our new notion of equilibrium combines two different approximations. First, we consider a Mean Field approximation to relax the informational requirements of agents. The motivation behind the mean field approximation is that, when the number of competitors is large, there is little value in tracking the specific actions of all agents and one may rely on some aggregate and stationary representation of the competitors' bids. Second, borrowing techniques from the revenue management literature, we consider a stochastic fluid approximation to handle the complex dynamics of the advertisers' control problem. Such approximations are suitable when the number of opportunities is large and the payment per opportunity is small compared to the budget; hence, it also fits well in the context of Ad Exchanges. We justify the use of the FMFE as an equilibrium concept in this setting by proving that the FMFE provides a good approximation to the rational behavior of agents in large markets.
Our second main contribution is to use this framework to provide sharp prescriptions for key auction design decisions that publishers face in these markets, such as the reserve price, the allocation of impressions to the exchange versus an alternative channel, and the disclosure of viewers' information. Notably, we show that proper adjustment of the reserve price is key in (1) making profitable for the publisher to try selling all impressions in the exchange before utilizing the alternative channel; and (2) compensating for the thinner markets created by greater disclosure of viewers' information.
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Year | DOI | Venue |
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2013 | 10.1145/2482540.2482576 | EC |
Keywords | Field | DocType |
main contribution,large market,stochastic fluid approximation,ad exchange,mean field approximation,different approximation,alternative channel,reserve price,ad exchanges,online display advertising exchange,good approximation,internet,mean field,budget constraints | Revenue management,Mathematical economics,Mathematical optimization,Reservation price,Budget constraint,Display advertising,Computer science,Microeconomics,Common value auction,Solution concept,Payment,Competitor analysis | Conference |
ISBN | Citations | PageRank |
978-1-4503-1962-1 | 10 | 0.65 |
References | Authors | |
12 | 3 | |
Name | Order | Citations | PageRank |
|---|---|---|---|
| Santiago R. Balseiro | 1 | 73 | 7.93 |
| Omar Besbes | 2 | 305 | 17.53 |
| Gabriel Y. Weintraub | 3 | 187 | 19.29 |