Convergence of Position Auctions under Myopic Best-Response Dynamics

Matthew  Cary; Aparna  Das; Benjamin  Edelman; Ioannis  Giotis; Kurtis  Heimerl; Anna  Karlin; Scott Duke Kominers; Claire  Mathieu; Michael  Schwarz

Article | ACM Transactions on Economics and Computation | July 2014

Convergence of Position Auctions under Myopic Best-Response Dynamics

by Matthew Cary, Aparna Das, Benjamin Edelman, Ioannis Giotis, Kurtis Heimerl, Anna Karlin, Scott Duke Kominers, Claire Mathieu and Michael Schwarz

Abstract

We study the dynamics of multi-round position auctions, considering both the case of exogenous click-through rates and the case in which click-through rates are determined by an endogenous consumer search process. In both contexts, we demonstrate that the dynamic auctions converge to their associated static, envy-free equilibria. Furthermore, convergence is efficient, and the entry of low-quality advertisers does not slow convergence. Because our approach predominantly relies on assumptions common in the sponsored search literature, our results suggest that dynamic position auctions converge more generally.

Keywords: sponsored search; advertising; google; equilibrium selection; Online Advertising; Advertising Industry;

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Cary, Matthew, Aparna Das, Benjamin Edelman, Ioannis Giotis, Kurtis Heimerl, Anna Karlin, Scott Duke Kominers, Claire Mathieu, and Michael Schwarz. "Convergence of Position Auctions under Myopic Best-Response Dynamics." ACM Transactions on Economics and Computation 2, no. 3 (July 2014): 1–20.

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Convergence of Position Auctions under Myopic Best-Response Dynamics

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