Research On Mechanism Design Of Keywords Auction

With the Internet’s rapid development and the information explosion today, thesearch engine has become a major way for Internet users to seek out valuable information.As an advertising auction mechanism, ranking rules has become one of the mainprofit-seeking means in search engine industry, which has gradually attracted the attentionof the researchers.However, driven by commercial profits, search engines often use this high popularityadvertising ranking system to provide information of low correlation and even falseadvertisements to Internet users. Firstly, our study presents a modified mechanism whichgives consideration to both the design goals in previous literature as well as the users’benefits. Based on the most widely used model-Generalized Second-Price auction (GSP)mechanism, the users’ benefits, which are measured by the total hits of the users, areintroduced. The modified mechanism selects advertisers by the quality weight andweighted bidding, in order to determine those who bid reasonably with high quality,signed as the first-type advertisers，then gives them priority arrangement in the searchengine result page (SERP). Next, this thesis commences from the aspect of the advertisers.Promoted by the auction rules that search engine pay more and more attention to thequality weight, advertisers are willing to improve their quality weight through investment.This paper describes endogenous investment which will affect the CTR advertisers caneventually obtain, and constructs a two-stage model. We focus on the existence anduniqueness of the threshold value for conversion and the advertisers’ optimal investment.And how the search engine’s auction rules influence the advertisers’ type conversion andoptimal amount of investment is also under discussion.Research shows that compared with the original GSP, the modified mechanismincreases CTR through analysis. Certain conditions should be strengthened in order tochange the search engine’s incomes. The results obtained by the numerical example are asfollows: the search engine’s current income under modified mechanism would reduce,while the total clicks of advertising entries are subsequently verified to increase. Whenthe slot number is moderate and appropriate, the advantages of the modified mechanismcan be fully observed. Further more, in the advertisers’ two-stage model, we find thatthere is a unique threshold value of L-type advertisers who want to under a certaincondition. Meanwhile, search engine’s auction rules could affect the advertisers’ type conversion and optimal investment to a certain extent. These conclusions mentionedabove can provide scientific decision-making reference and management revelation forsearch engines and advertisers to pay attention to service and improve their own quality.