Equilibrium analysis of dynamic bidding in sponsored search auctions

Yevgeniy Vorobeychik, Daniel M. Reeves
2008 International Journal of Electronic Business  
We analyze symmetric pure strategy equilibria in dynamic sponsored search auction games using simulations, restricting the strategies to several in a class of greedy bidding strategies introduced by Cary et al. We show that a particular convergent strategy, "balanced bidding", also exhibits high stability to deviations in the dynamic setting. On the other hand, a cooperative strategy which yields high payoffs to all players is not sustainable in equilibrium play. Additionally, we analyze a
more » ... ted game in which each stage is a static complete-information sponsored search game. In this setting, we demonstrate a collusion strategy which yields high payoffs to all players and empirically show it to be sustainable over a range of settings. Finally, we show how a collusive strategy profile can arise even in the case of incomplete information.
doi:10.1504/ijeb.2008.018071 fatcat:z33omleijvabzm3jrccnboar6a