TY - GEN
T1 - Auctions with intermediaries
AU - Feldman, Jon
AU - Mirrokni, Vahab
AU - Muthukrishnan, S.
AU - Pai, Mallesh M.
PY - 2010
Y1 - 2010
N2 - Inspired by online advertisement exchange systems, we study a setting where potential buyers of a unique, indivisible good attempt to purchase from a central seller via a set of intermediaries. Each intermediary has captive buyers, and runs an auction for a 'contingent' good. Based on the outcome, the intermediary bids in a subsequent upstream auction run by the seller. In this paper, we study the equilibria and incentives of intermediaries and the central seller. We find that combining the notion of optimal auction design with the double-marginalization arising from the presence of intermediaries yields new strategic elements not present in either setting individually: we show that in equilibrium, revenue-maximizing intermediaries will use an auction with a randomized reserve price chosen from an interval. We characterize the interval and the probability distribution from which this reserve price is chosen as a function of the distribution of buyers' types. Furthermore, we characterize the revenue maximizing auction for the central seller by taking into account the effect of his choice of mechanism on the mechanisms offered by the intermediaries. We find that the optimal reserve price offered by the seller decreases with the number of buyers (but remains strictly positive); in contrast to the classical optimal auction without intermediaries, where the reserve price is independent of the number of buyers.
AB - Inspired by online advertisement exchange systems, we study a setting where potential buyers of a unique, indivisible good attempt to purchase from a central seller via a set of intermediaries. Each intermediary has captive buyers, and runs an auction for a 'contingent' good. Based on the outcome, the intermediary bids in a subsequent upstream auction run by the seller. In this paper, we study the equilibria and incentives of intermediaries and the central seller. We find that combining the notion of optimal auction design with the double-marginalization arising from the presence of intermediaries yields new strategic elements not present in either setting individually: we show that in equilibrium, revenue-maximizing intermediaries will use an auction with a randomized reserve price chosen from an interval. We characterize the interval and the probability distribution from which this reserve price is chosen as a function of the distribution of buyers' types. Furthermore, we characterize the revenue maximizing auction for the central seller by taking into account the effect of his choice of mechanism on the mechanisms offered by the intermediaries. We find that the optimal reserve price offered by the seller decreases with the number of buyers (but remains strictly positive); in contrast to the classical optimal auction without intermediaries, where the reserve price is independent of the number of buyers.
KW - ad exchanges
KW - intermediaries
KW - optimal auctions
UR - http://www.scopus.com/inward/record.url?scp=77954733212&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=77954733212&partnerID=8YFLogxK
U2 - 10.1145/1807342.1807346
DO - 10.1145/1807342.1807346
M3 - Conference contribution
AN - SCOPUS:77954733212
SN - 9781605588223
T3 - Proceedings of the ACM Conference on Electronic Commerce
SP - 23
EP - 32
BT - EC'10 - Proceedings of the 2010 ACM Conference on Electronic Commerce
T2 - 11th ACM Conference on Electronic Commerce, EC'10
Y2 - 7 June 2010 through 11 June 2010
ER -