NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Kurtis Heimerl

University of Washington
Department of Computer Science
and Engineering
Seattle, WA 98195

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org

NBER Working Papers and Publications

February 2008On Best-Response Bidding in GSP Auctions
with Matthew Cary, Aparna Das, Benjamin Edelman, Ioannis Giotis, Anna R. Karlin, Claire Mathieu, Michael Schwarz: w13788
How should players bid in keyword auctions such as those used by Google, Yahoo! and MSN? We model ad auctions as a dynamic game of incomplete information, so we can study the convergence and robustness properties of various strategies. In particular, we consider best-response bidding strategies for a repeated auction on a single keyword, where in each round, each player chooses some optimal bid for the next round, assuming that the other players merely repeat their previous bids. We focus on a strategy we call Balanced Bidding (bb). If all players use the bb strategy, we show that bids converge to a bid vector that obtains in a complete information static model proposed by Edelman, Ostrovsky and Schwarz (2007). We prove that convergence occurs with probability 1, and we compute the expecte...
 
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