Sponsored search auctions with markovian users

Gagan Aggarwal, Jon Feldman, S. Muthukrishnan, Martin Pál

    Research output: Chapter in Book/Report/Conference proceedingConference contribution


    Sponsored search involves running an auction among advertisers who bid in order to have their ad shown next to search results for specific keywords. The most popular auction for sponsored search is the "Generalized Second Price" (GSP) auction where advertisers are assigned to slots in the decreasing order of their score, which is defined as the product of their bid and click-through rate. One of the main advantages of this simple ranking is that bidding strategy is intuitive: to move up to a more prominent slot on the results page, bid more. This makes it simple for advertisers to strategize. However this ranking only maximizes efficiency under the assumption that the probability of a user clicking on an ad is independent of the other ads shown on the page. We study a Markovian user model that does not make this assumption. Under this model, the most efficient assignment is no longer a simple ranking function as in GSP. We show that the optimal assignment can be found efficiently (even in near-linear time). As a result of the more sophisticated structure of the optimal assignment, bidding dynamics become more complex: indeed it is no longer clear that bidding more moves one higher on the page. Our main technical result is that despite the added complexity of the bidding dynamics, the optimal assignment has the property that ad position is still monotone in bid. Thus even in this richer user model, our mechanism retains the core bidding dynamics of the GSP auction that make it useful for advertisers.

    Original languageEnglish (US)
    Title of host publicationInternet and Network Economics - 4th International Workshop, WINE 2008, Proceedings
    Number of pages8
    StatePublished - 2008
    Event4th International Workshop on Internet and Network Economics, WINE 2008 - Shanghai, China
    Duration: Dec 17 2008Dec 20 2008

    Publication series

    NameLecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
    Volume5385 LNCS
    ISSN (Print)0302-9743
    ISSN (Electronic)1611-3349


    Conference4th International Workshop on Internet and Network Economics, WINE 2008

    ASJC Scopus subject areas

    • Theoretical Computer Science
    • General Computer Science


    Dive into the research topics of 'Sponsored search auctions with markovian users'. Together they form a unique fingerprint.

    Cite this