5- Keyword auctions Flashcards

1
Q

What is the measure of success of pay-per-click (PPC) advertising?

A

Click-through-rate (CTR)

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2
Q

What is the formula for click-through-rate (CTR)?

A

♯users clicking on ad/♯users viewing ad

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3
Q

Describe a Generalised Second-Price auction (GSP)

A

-Each advertiser places a bid
-Bids are ranked by value
-Each bidder pays the next highest bid for each click

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4
Q

In a GSP auction, how does the number of bidders relate to the links displayed?

A

There is always at least 1 more bidder than the number of links awarded. If there are only 3 bidders then only 2 sponsored links are displayed.

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5
Q

What is the net payoff for a click?

A

Valuation for a click - price per click

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6
Q

What is the net payoff per hour of a position?

A

Net payoff per click x clicks per hour

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7
Q

What problem did Google identify with the base GSP auction?

A

Click frequency depends on advertiser, but if click frequency is low then Google’s revenue is low

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8
Q

What are the 4 determinants of quality score?

A

-CTR
-ad relevance
-user experience (UX)
-other things (secret sauce)

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9
Q

What is the Final score of a bidder?

A

Final score = Bid x Quality score

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10
Q

How are bidders charged when pricing with quality scores?

A

Advertisers are ranked according to the final score. Charge each advertiser the lowest price/click p such that final score is greater than next highest

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11
Q

What 3 simplifying assumptions do we use to analyse GSP auctions?

A

-Valuations are commonly known: eventually, advertisers learn all the relevant information.
-Stable bids must form a Nash equilibrium of the
simultaneous-move, one shot game of complete information.
-We use simple strategies

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12
Q

Describe a Simple strategy

A

-Opponent is currently beating your bid
-Player slightly increases bid such that their price and position is the same but opponent must pay more
-Opponent retaliates by bidding slightly lower to swap ranks

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13
Q

When will bidders use a Simple strategy?

A

If the Simple strategy improves their payoff

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14
Q

Define Long run equilibrium

A

An equilibrium of the simultaneous-move game induced by GSP is locally envy-free if a player cannot improve her payoff by exchanging bids with the bidder one position above her

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15
Q

What are the 2 conditions for Long run equilibrium?

A

-Nash equilibrium
-Envy freeness

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16
Q

What is the equation/inequality for Long run equilibrium?

A

αᵢv₉₍ᵢ₎ - pᵢ ≥ αᵢ₋₁ - v₉₍ᵢ₎ - pᵢ₋₁

17
Q

When is an assignment stable?

A

An assignment (µ) of price p is stable if there’s no advertiser i and a position k such that:
µ(i) ≠ k (k not assigned to i)
αk ×vᵢ > (i’s net payoff under µ) + (k’s net payoff under µ)

18
Q

What is the main difference between equilibrium and stability?

A

In equilibrium only bidders have to be better off, whereas for stability the seller’s payoff matters too

19
Q

What is the relation between locally envy-free equilibria and stability?

A

The outcome of any locally envy-free equilibrium in the GSP auction is a stable assignment.

20
Q

Describe a Generalised English auction (GEA)

A

-Price clock starts at 0 and increases over time
-Advertisers choose price at which to drop out which will be their bid
-Advertisers ranked on bid and pay the bid of bidder just below them

21
Q

What is the perfect Bayesian equilibrium proposition for Generalised English auctions?

A

There is a unique equilibrium of the generalized
English auction, where an advertiser with valuation v drops out at price p*

22
Q

What is the formula for perfect Bayesian equilibrium price p*?

A

p* = v - αᵢ/αᵢ₋₁(v-bᵢ₊₁)

23
Q

What is the relationship between GEA equilibrium payoffs and VCG payoffs?

A

Equilibrium payoffs of GEA = VCG payoffs