A nash bargaining approach to retention enhancing bid optimization in sponsored search auctions with discrete bids

Ramakrishnan Kannan, Dinesh Garg, Karthik Subbian, Y. Narahari

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

7 Scopus citations

Abstract

Bid optimization is now becoming quite popular in sponsored search auctions on the web. Given a keyword and the maximum willingness to pay of each advertiser interested in the keyword, the bid optimizer generates a profile of bids for the advertisers with the objective of maximizing customer retention without compromising the revenue of the search engine. In this paper, we present a bid optimization algorithm that is based on a Nash bargaining model where the first player is the search engine and the second player is a virtual agent representing all the bidders. We make the realistic assumption that each bidder specifies a maximum willingness to pay values and a discrete, finite set of bid values. We show that the Nash bargaining solution for this problem always lies on a certain edge of the convex hull such that one end point of the edge is the vector of maximum willingness to pay of all the bidders. We show that the other endpoint of this edge can be computed as a solution of a linear programming problem. We also show how the solution can be transformed to a bid profile of the advertisers.

Original languageEnglish
Title of host publication4th IEEE Conference on Automation Science and Engineering, CASE 2008
Pages1007-1012
Number of pages6
DOIs
StatePublished - 2008
Externally publishedYes
Event4th IEEE Conference on Automation Science and Engineering, CASE 2008 - Washington, DC, United States
Duration: Aug 23 2008Aug 26 2008

Publication series

Name4th IEEE Conference on Automation Science and Engineering, CASE 2008

Conference

Conference4th IEEE Conference on Automation Science and Engineering, CASE 2008
Country/TerritoryUnited States
CityWashington, DC
Period08/23/0808/26/08

Keywords

  • Advertiser retention
  • Bid optimizers
  • Internet advertising
  • Mechanism design
  • Nash bargaining
  • Sponsored search auctions

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