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A Nash Bargaining Approach to Retention Enhancing Bid Optimization in Sponsored Search Auctions with Discrete Bids

Kannan, Ramakrishnan and Garg, Dinesh and Subbian, Karthik and Narahari, Y (2008) A Nash Bargaining Approach to Retention Enhancing Bid Optimization in Sponsored Search Auctions with Discrete Bids. In: 4th IEEE Conference on Automation Science and Engineering Key Bridge Marriott, Washington DC, USA, 23-26 Aug. 2008, Arlington, VA .

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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.

Item Type: Conference Paper
Publisher: IEEE
Additional Information: Copyright 2008 IEEE. Personal use of this material is permitted. However, permission to reprint/republish this material for advertising or promotional purposes or for creating new collective works for resale or redistribution to servers or lists, or to reuse any copyrighted component of this work in other works must be obtained from the IEEE.
Keywords: Bid optimizers;Nash bargaining;advertiser retention;sponsored search auctions;internet advertising;mechanism design
Department/Centre: Division of Electrical Sciences > Computer Science & Automation
Date Deposited: 23 Sep 2011 09:31
Last Modified: 23 Sep 2011 09:31
URI: http://eprints.iisc.ac.in/id/eprint/40675

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