sponsored search auctions - ad words auction

[Jacob Hansen]

Hi

I am currently doing my master thesis about search engines and ad sponsored search auctions. I would like to discuss certain issues about the structure, incentives and implications of the sponsored search auctions. Anybody knowledgeable or interested in the field?

Best

//Jacob

[David]

hey jacob i know quite a lot about this, as a starting point watch this video

http://www.seohelpbook.com/video/hal-varian/introduction-to-the-goo...

[Jacob Hansen]

Hi David

Thanks for your very quick reply! Yeah I have seen that movie.

What that is currently struggling me is that I am wandering why Google structure their auction as a second price auction. I have been in contact with a guy who used to work on the ad-auction who suggested that the second price auction wasn't optimal.
As far as I understand the academic literature (including Hal Varian) suggest that a VCG auction could be a reasonable alternative.
I have all the papers by Hal Varian, Schwarts etc. (though I still haven't grasped all the math) - but I cannot seem to find any answers for why some of the search engines are not trying out alternative auction designs like the VCG?

Do you know whether all search engines use the GSP auction? If so, don't you think there are some better alternatives?

Furthermore do you know any good forums/websites where ad-auctions are discussed?

Thanks

//Jacob

[Peter Willis]

hi Jacob,

i found some possible answers for you, the VCG has some additional shortcomings below:

Despite the Vickrey auction's strengths, it has shortcomings:

It does not allow for Price discovery, that is, discovery of the market price if the buyers are unsure of their own valuations, without sequential auctions.
Sellers may use shill bids to increase profit.
In iterated Vickrey auctions, the strategy of revealing true valuations is no longer dominant.[vague]


The Vickrey-Clarke-Groves (VCG) mechanism has the additional shortcomings:

It is vulnerable to collusion by losing bidders.
It is vulnerable to shill bidding with respect to the buyers.
It does not necessarily maximize seller revenues; seller revenues may even be zero in VCG auctions. If the purpose of holding the auction is to maximize profit for the seller rather than just allocate resources among buyers, then VCG may be a poor choice.
The seller's revenues are non-monotonic with regard to the sets of bidders and offers.

[Kai]

Hi Jacob

I am also writing my diploma thesis about the GSP. I am very close to the end. I investigate its vulnerabliltiy to collusion. Right know, I search for a form of transfer payments / pre auction knockout in order to establish a bidder cartel.

There are several papers that suggest superior design, such as Borgers, Pesendorfer and others.

If you are interestes, we may exchange ideas!

Actually, you may have already found this video:
http://video.google.com/videosearch?hl=de&q=generalized%20secon...

Peace
K.