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What is a generalized second-price auction? | Statistical Odds & Ends

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Assume that bidder bids amount , and assume without loss of generality that . In a first-price auction, bidder wins and pays . In a standard second-price auction, bidder wins slot 1 but pays . (In practice, we often have pay , where is some small amount.) Second-price auctions became popular because they incentivized “truthful bidding”, i.e. a bidder should bid an amount equal to what they value winning the auction to be worth. Such an auction is said to be incentive-compatible. (First-price auctions are not incentive-compatible.) First generalization: Multiple slots The standard second-price auction assumes that there can be only one winner. In many cases we might have multiple items up for grabs in the same auction. For example, in e-commerce, an ad request might have multiple “slots” up for grabs, with slot 1 being most valuable, followed by slot 2, and so on. In a generalized second-price auction (GSP), bidders are only allowed to submit a single bid for all the slots. Assumin

Assume that bidder bids amount , and assume without loss of generality that . In a first-price auction , bidder wins and pays . In a standard second-price auction , bidder wins slot 1 but pays . (In practice, we often have pay , where is some small amount.) Second-price auctions became popular because they incentivized “truthful bidding”, i.e. a bidder should bid an amount equal to what they value winning the auction to be worth. Such an auction is said to be incentive-compatible . (First-price auctions are not incentive-compatible.) First generalization: Multiple slots The standar

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