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Optimal dynamic mechanism design via a virtual VCG mechanism

Optimal dynamic mechanism design via a virtual VCG mechanism Optimal Dynamic Mechanism Design via a Virtual VCG Mechanism SHAM M. KAKADE Department of Statistics, Wharton School, University of Pennsylvania. and ILAN LOBEL Stern School of Business, New York University. and HAMID NAZERZADEH Microsoft Research, New England Lab. We consider the problem of designing revenue maximizing mechanisms for dynamic settings. We propose a simple optimal mechanism for rather general œseparable  settings. The proposed mechanism is implemented via an a ƒne transformation of a dynamic VCG mechanism. Categories and Subject Descriptors: K.4.4 [Computers and Society]: Electronic Commerce General Terms: Economics, Theory, Algorithms Additional Key Words and Phrases: Mechanism Design, Dynamics, Optimal Mechanisms, E ƒcient Mechanisms, VCG, Electronic Marketplaces, Internet Advertising 1. INTRODUCTION Extracting revenue from strategic agents in dynamic environments ” in which agents ™ private information changes over time ” is a central issue in many markets such as Internet adverting. While the theory of optimal mechanism design has enjoyed much success in static settings, the celebrated mechanism proposed by Myerson [1981] does not easily translate into an optimal mechanism for dynamic settings. One compelling application is that of ad auctions where publishers sell the space on their webpages to the advertisers. In Internet advertising (e.g., sponsored http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png ACM SIGecom Exchanges Association for Computing Machinery

Optimal dynamic mechanism design via a virtual VCG mechanism

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Publisher
Association for Computing Machinery
Copyright
Copyright © 2011 by ACM Inc.
ISSN
1551-9031
DOI
10.1145/1978721.1978728
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Abstract

Optimal Dynamic Mechanism Design via a Virtual VCG Mechanism SHAM M. KAKADE Department of Statistics, Wharton School, University of Pennsylvania. and ILAN LOBEL Stern School of Business, New York University. and HAMID NAZERZADEH Microsoft Research, New England Lab. We consider the problem of designing revenue maximizing mechanisms for dynamic settings. We propose a simple optimal mechanism for rather general œseparable  settings. The proposed mechanism is implemented via an a ƒne transformation of a dynamic VCG mechanism. Categories and Subject Descriptors: K.4.4 [Computers and Society]: Electronic Commerce General Terms: Economics, Theory, Algorithms Additional Key Words and Phrases: Mechanism Design, Dynamics, Optimal Mechanisms, E ƒcient Mechanisms, VCG, Electronic Marketplaces, Internet Advertising 1. INTRODUCTION Extracting revenue from strategic agents in dynamic environments ” in which agents ™ private information changes over time ” is a central issue in many markets such as Internet adverting. While the theory of optimal mechanism design has enjoyed much success in static settings, the celebrated mechanism proposed by Myerson [1981] does not easily translate into an optimal mechanism for dynamic settings. One compelling application is that of ad auctions where publishers sell the space on their webpages to the advertisers. In Internet advertising (e.g., sponsored

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ACM SIGecom Exchanges – Association for Computing Machinery

Published: Mar 1, 2011

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