In this paper, we discuss how advertisers, by considering minimum return on investment (ROI), change their bidding and, consequently the auctioneer’s revenue in sponsored search advertisement auctions. We analyze the VickreyClarke-Groves (VCG), Generalized Second Price (GSP) and Generalized First Price (GFP) auction mechanisms in that respect. Analytical results are presented for the dominant strategy bidding prices in the Vickrey-ClarkeGroves auction and the ex-post equilibrium locally-envy free prices in the Generalized Second Price auction. The simulation results are presented for all three mechanisms: VCG, GSP, and GFP auctions. We conclude that the impact of considering ROI during bidding varies among different auction mechanisms, changing the traditional assessment of their merits for sponsored search advertisement.
[1]
William Vickrey,et al.
Counterspeculation, Auctions, And Competitive Sealed Tenders
,
1961
.
[2]
M. Bichler.
The Future of e-Markets: Multidimensional Market Mechanisms
,
2001
.
[3]
Boleslaw K. Szymanski,et al.
A novel auction mechanism for selling time-sensitive e-services
,
2005,
Seventh IEEE International Conference on E-Commerce Technology (CEC'05).
[4]
Kursad Asdemir.
BIDDING PATTERNS IN SEARCH ENGINE AUCTIONS
,
2006
.
[5]
E. Maasland,et al.
Auction Theory
,
2021,
Springer Texts in Business and Economics.