The Design of Advertising Exchanges

The Design of Advertising Exchanges Internet advertising exchanges possess three characteristics—fast delivery, low values, and automated systems—that influence market design. Automated learning systems induce the winner’s curse when several pricing types compete. Bidders frequently compete with different data, which induces randomization in equilibrium. Machine learning causes the value of information to leak across participants. Discrimination may be used to induce efficient exploration, although publishers (websites) may balk at participating. The creation of “learning accounts,” which divorce payments from receipts, may be used to internalize learning externalities. Under some learning mechanisms the learning account eventually shows a surplus. The solution is illustrated computationally. Review of Industrial Organization Springer Journals

The Design of Advertising Exchanges

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Springer US
Copyright © 2011 by Springer Science+Business Media, LLC.
Economics; Industrial Organization; Microeconomics
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