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Blockchain-Based Ad Auctions and Bayesian Persuasion: An Analysis of Advertiser Behavior

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  • Xinyu Li

Abstract

This paper explores how ad platforms can utilize Bayesian persuasion within blockchain-based auction systems to strategically influence advertiser behavior despite increased transparency. By integrating game-theoretic models with machine learning techniques and the principles of blockchain technology, we analyze the role of strategic information disclosure in ad auctions. Our findings demonstrate that even in environments with inherent transparency, ad platforms can design signals to affect advertisers' beliefs and bidding strategies. A detailed case study illustrates how machine learning can predict advertiser responses to different signals, leading to optimized signaling strategies that increase expected revenue. The study contributes to the literature by extending Bayesian persuasion models to transparent systems and providing practical insights for auction design in the digital advertising industry.

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  • Xinyu Li, 2024. "Blockchain-Based Ad Auctions and Bayesian Persuasion: An Analysis of Advertiser Behavior," Papers 2410.07392, arXiv.org.
    • Handle: RePEc:arx:papers:2410.07392
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    1. Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2007. "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords," American Economic Review, American Economic Association, vol. 97(1), pages 242-259, March.
    2. Joo, Mingyu & Kim, Seung Hyun & Ghose, Anindya & Wilbur, Kenneth C., 2023. "Designing Distributed Ledger technologies, like Blockchain, for advertising markets," International Journal of Research in Marketing, Elsevier, vol. 40(1), pages 12-21.
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