TY  - JOUR
AU  - Edelman,Benjamin
AU  - Ostrovsky,Michael
AU  - Schwarz,Michael
TI  - Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11765
PY  - 2005
Y2  - November 2005
UR  - http://www.nber.org/papers/w11765
L1  - http://www.nber.org/papers/w11765.pdf
N1  - Author contact info:
Benjamin Edelman
Harvard Business School
Baker Library 445
Soldiers Field
Boston, Massachusetts 02163
E-Mail: bedelman@hbs.edu

Michael Ostrovsky
Stanford Graduate School of Business
518 Memorial Way
Stanford, CA 94305
Tel: (650)724-7280
E-Mail: ostrovsky@gsb.stanford.edu

Michael Schwarz
Yahoo! Research
2397 Shattuck Ave
Berkeley, CA 94704
Fax: 510/704-2401
E-Mail: mschwarz@yahoo-inc.com
AB  - We investigate the "generalized second price" auction (GSP), a new mechanism which is used by search engines to sell online advertising that most Internet users encounter daily. GSP is tailored to its unique environment, and neither the mechanism nor the environment have previously been studied in the mechanism design literature. Although GSP looks similar to the Vickrey-Clarke-Groves (VCG) mechanism, its properties are very different. In particular, 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 in a dynamic environment, we describe the generalized English auction that corresponds to the GSP and show that it has a unique equilibrium. This is an ex post equilibrium that results in the same payoffs to all players as the dominant strategy equilibrium of VCG.
ER  -