An experimental evaluation of bidders' behavior in ad auctions

Gali Noti*, Noam Nisan, Ilan Yaniv

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

8 Scopus citations

Abstract

We performed controlled experiments of human participants in a continuous sequence of ad auctions, similar to those used by Internet companies. The goal of the research was to understand users' strategies in making bids. We studied the behavior under two auction types: (1) the Generalized Second-Price (GSP) auction and (2) the Vickrey-Clarke- Groves (VCG) payment rule, and manipulated also the par- ticipants' knowledge conditions: (1) explicitly given valuations and (2) payoff information from which valuations could be deduced. We found several interesting behaviors, among them are: • No convergence to equilibrium was detected; moreover the frequency with which participants modified their bids increased with time. • We can detect explicit"better-response "behavior rather than just mixed bidding. • While bidders in GSP auctions do strategically shade their bids, they tend to bid higher than theoretically predicted by the standard VCG-like equilibrium of GSP. • Bidders who are not explicitly given their valuations but can only deduce them from their gains behave a little less "precisely " than those with such explicit knowledge, but mostly during an initial learning phase. • VCG and GSP yield approximately the same (high) social welfare, but GSP tends to give higher revenue. Copyright is held by the International World Wide Web Conference Committee (IW3C2).

Original languageAmerican English
Title of host publicationWWW 2014 - Proceedings of the 23rd International Conference on World Wide Web
PublisherAssociation for Computing Machinery
Pages619-629
Number of pages11
ISBN (Electronic)9781450327442
DOIs
StatePublished - 7 Apr 2014
Event23rd International Conference on World Wide Web, WWW 2014 - Seoul, Korea, Republic of
Duration: 7 Apr 201411 Apr 2014

Publication series

NameWWW 2014 - Proceedings of the 23rd International Conference on World Wide Web

Conference

Conference23rd International Conference on World Wide Web, WWW 2014
Country/TerritoryKorea, Republic of
CitySeoul
Period7/04/1411/04/14

Bibliographical note

This research was also presented to the Hebrew University Center for the Study of Rationality, Discussion paper,
Volume: no. 676, in 2014.

Keywords

  • Advertising auctions
  • Experimental economics

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