The generalized first-price auction (GFP) is a non-truthful auction mechanism for
sponsored search (a.k.a. position auctions).
In sponsored search ''n'' bidders compete for the assignment of ''k'' slots. Each slot has an associate click-through rate, the click-through rates are decreasing from top to bottom. The GFP mechanism asks each bidder for a bid. Then the highest bidder gets the first slot, the second-highest, the second slot and so on. On each click the highest bidder pays his bid on the first slot, the second highest bidder pays his bid on the second slot, and so on.
The GFP mechanism was the first mechanism to find application in
sponsored search, replacing the "flat fee" and "per-impression" model that was the standard. Overture adopted the GFP mechanism in 1997, and provided service to
Yahoo!
Yahoo! (, styled yahoo''!'' in its logo) is an American web services provider. It is headquartered in Sunnyvale, California and operated by the namesake company Yahoo Inc., which is 90% owned by investment funds managed by Apollo Global Manage ...
and
MSN
MSN (meaning Microsoft Network) is a web portal and related collection of Internet services and apps for Windows and mobile devices, provided by Microsoft and launched on August 24, 1995, alongside the release of Windows 95.
The Microsoft Net ...
. Although very successful initially, bidders quickly learned how to manipulate the mechanism. Bidding patterns exhibited a characteristic saw-tooth pattern,
and the mechanism need not possess a (pure) Nash equilibrium.
These deficiencies lead to the replacement of the GFP mechanism in practice, and the adoption of alternate auction designs.
Recent work by Hoy et al.
and Dütting et al.
shows that the deficiencies of the GFP mechanism can be ascribed to its bidding interface, and that adopting a more expressive bidding interface guarantees the existence of an efficient
Nash equilibrium under complete information as well as an efficient
Bayes-Nash equilibrium under incomplete information.
See also
*
Generalized second-price auction
The generalized second-price auction (GSP) is a non-truthful auction mechanism for multiple items. Each bidder places a bid. The highest bidder gets the first slot, the second-highest, the second slot and so on, but the highest bidder pays the pri ...
*
Vickrey–Clarke–Groves auction
A Vickrey–Clarke–Groves (VCG) auction is a type of sealed-bid auction of multiple items. Bidders submit bids that report their valuations for the items, without knowing the bids of the other bidders. The auction system assigns the items in a ...
*
First-price sealed-bid auction
*
AdWords
Google Ads (formerly Google AdWords) is an online advertising platform developed by Google, where advertisers bid to display brief advertisements, service offerings, product listings, or videos to web users. It can place ads both in the result ...
References
{{Reflist
Types of auction