Introduction This is a simple post about some commonly known features of online ad auctions. Generalized second-price auction (GSP) is a mechanism in which the advertiser pays a marginally higher bid than the advertiser losing to him. It encourages the bidder to place a truthful bid, i.e. one where the price level is such that marginal returns equal marginal cost.…
Associate Professor (tenure track) at the University of Vaasa, and Adjunct Professor at the Turku School of Economics. Based in Finland.