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Hybrid mechanisms for Vickrey–Clarke–Groves and generalized second-price bids

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  • Patrick Hummel

    (Google Inc.)

Abstract

This paper analyzes mechanisms for selling advertising opportunities for several different positions on a page that would enable some advertisers to bid using Vickrey–Clarke–Groves (VCG) pricing while other advertisers bid using generalized second-price (GSP) pricing. I focus on a setting in which the number of ads displayed may vary with the advertisers’ bids and showing fewer ads enables the remaining ads to obtain more clicks. I illustrate the types of mechanisms one can construct that would ensure that VCG bidders have an incentive to bid truthfully, GSP bidders cannot obtain the same number of clicks at a lower price by varying their bid, and if all bidders bid using VCG (GSP) pricing, then the outcome is the same as it would be under the VCG (GSP) mechanism.

Suggested Citation

  • Patrick Hummel, 2018. "Hybrid mechanisms for Vickrey–Clarke–Groves and generalized second-price bids," International Journal of Game Theory, Springer;Game Theory Society, vol. 47(1), pages 331-350, March.
    • Handle: RePEc:spr:jogath:v:47:y:2018:i:1:d:10.1007_s00182-017-0591-9
    DOI: 10.1007/s00182-017-0591-9
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    Cited by:

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    2. Margarida V. B. Santos & Isabel Mota & Pedro Campos, 2023. "Analysis of online position auctions for search engine marketing," Journal of Marketing Analytics, Palgrave Macmillan, vol. 11(3), pages 409-425, September.

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    More about this item

    Keywords

    Hybrid mechanisms; Vickrey–Clarke–Groves; Generalized second-price; Position auctions; Online advertising;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design

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