Adaptive incentive-compatible sponsored search auction

Rica Gonen, Elan Pavlov

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review


This paper presents a truthful sponsored search auction based on an incentive-compatible multi-armed bandit mechanism. The mechanism described combines several desirable traits. The mechanism gives advertisers the incentive to report their true bid, learns the clickthrough rate for advertisements, allows for slots with different quality, and loses the minimum welfare during the sampling process. The underlying generalization of the multi-armed bandit mechanism addresses the interplay between exploration and exploitation in an online setting that is truthful in high probability while allowing for slots of different quality. As the mechanism progresses the algorithm more closely approximates the hidden variables (click-though rates) in order to allocate advertising slots to the best advertisements. The resulting mechanism obtains the optimal welfare apart from a tightly bounded loss of welfare caused by the bandit sampling process. Of independent interest, in the field of economics it has long been recogniz d that preference elicitation is difficult to achieve, mainly as people are unaware of how much happiness a particular good will bring to them. In this paper we alleviate this problem somewhat by introducing a valuation-discovery process to the mechanism which results in a preference-elicitation mechanism for advertisers and search engines.

Original languageEnglish
Title of host publicationSOFSEM 2009
Subtitle of host publicationTheory and Practice of Computer Science - 35th Conference on Current Trends in Theory and Practice of Computer Science, Proceedings
Number of pages14
StatePublished - 2009
Externally publishedYes
Event35th Conference on Current Trends in Theory and Practice of Computer Science, SOFSEM 2009 - Spindleruv Mlyn, Czech Republic
Duration: 24 Jan 200930 Jan 2009

Publication series

NameLecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
Volume5404 LNCS
ISSN (Print)0302-9743
ISSN (Electronic)1611-3349


Conference35th Conference on Current Trends in Theory and Practice of Computer Science, SOFSEM 2009
Country/TerritoryCzech Republic
CitySpindleruv Mlyn


Dive into the research topics of 'Adaptive incentive-compatible sponsored search auction'. Together they form a unique fingerprint.

Cite this