Research Paper Abstract:
The Harvard Business School has modeled ad auctions as a dynamic game of incomplete information, so we can study the convergence and robustness properties of various strategies. In particular, we consider best-response bidding strategies for a repeated auction on a single keyword, where in each round, each player chooses some optimal bid for the next round, assuming that the other players merely repeat their previous bids.
We focus on a strategy we call Balanced Bidding (BB). If all players use the BB strategy, we show that bids converge to a bid vector that obtains in a complete information static model proposed by Edelman, Ostrovsky, and Schwarz. We prove that convergence occurs with probability 1, and we compute the expected time until convergence.
Paper Information
Full Working Paper Text http://www.hbs.edu/research/pdf/08-056.pdf
Working Paper Publication Date: January 2008
HBS Working Paper Number: 08-056
Faculty Unit: Negotiation, Organizations & Markets
