Edelman, Benjamin. “Assessing and Improving the Safety of Internet Search Engines.” In The Power of Search Engines [Die Macht der Suchmaschinen], edited by Marcel Machill and Markus Beiler, 259-277. Köln, Germany: Herbert von Halem Verlag, 2007.
Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords
Edelman, Benjamin, Michael Ostrovsky, and Michael Schwarz. “Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords.” American Economic Review 97, no. 1 (March 2007): 242-259.
Winner of the 2013 Prize in Game Theory and Computer Science from the Game Theory Society (for “the best paper at the interface of game theory and computer science in the last decade”).
Winner of the 2018 SIGecom Test of Time Award from the ACM Special Interest Group on E-Commerce (for “an influential paper or series of papers published between ten and twenty-five years ago that has significantly impacted research or applications exemplifying the interplay of economics and computation”).
We investigate the “generalized second-price” auction (GSP), a new mechanism used by search engines to sell online advertising. Although GSP looks similar to the Vickrey-Clarke-Groves (VCG) mechanism, its properties are very different. Unlike the VCG mechanism, GSP generally does not have an equilibrium in dominant strategies, and truth-telling is not an equilibrium of GSP. To analyze the properties of GSP, we describe the generalized English auction that corresponds to the GSP and show that it has a unique equilibrium. This is an ex post equilibrium, with the same payoffs to all players as the dominant strategy equilibrium of VCG.
Strategic Bidder Behavior in Sponsored Search Auctions
Edelman, Benjamin, and Michael Ostrovsky. “Strategic Bidder Behavior in Sponsored Search Auctions.” Decision Support Systems 43, no. 1 (February 2007): 192-198. (Winner of Emerald Citations of Excellence.)
We examine sponsored search auctions run by Overture (now part of Yahoo!) and Google and present evidence of strategic bidder behavior in these auctions. Between June 15, 2002, and June 14, 2003, we estimate that Overture’s revenue from sponsored search might have been higher if it had been able to prevent this strategic behavior. We present a specific alternative mechanism that could reduce the amount of strategizing by bidders, raise search engines’ revenue, and also increase the overall efficiency of the market. We conclude by showing that advertisers’ strategic behavior has not disappeared over time; rather, such behavior remains present on both search engines.
Greedy Bidding Strategies for Keyword Auctions
Cary, Matthew, Aparna Das, Benjamin Edelman, Ioannis Giotis, Kurtis Heimerl, Anna Karlin, Claire Mathieu, and Michael Schwarz. “Greedy Bidding Strategies for Keyword Auctions.” Proceedings of the International Conference on Electronic Commerce (2007): 262-271.
How should players bid in keyword auctions such as those used by Google, Yahoo! and MSN? We consider greedy 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 bid. We study the revenue, convergence and robustness properties of such strategies. Most interesting among these is a strategy we call the balanced bidding strategy (bb): it is known that bb has a unique fixed point with payments identical to those of the VCG mechanism. We show that if all players use the bb strategy and update each round, bb converges when the number of slots is at most 2, but does not always converge for 3 or more slots. On the other hand, we present a simple variant which is guaranteed to converge to the same fixed point for any number of slots. In a model in which only one randomly chosen player updates each round according to the bb strategy, we prove that convergence occurs with probability 1. We complement our theoretical results with empirical studies.
Optimal Auction Design in a Multi-unit Environment: The Case of Sponsored Search Auctions
Edelman, Benjamin, and Michael Schwarz. “Optimal Auction Design in a Multi-unit Environment: The Case of Sponsored Search Auctions.” December 2006. Mimeo. (Revised and published as Optimal Auction Design and Equilibrium Selection in Sponsored Search Auctions, American Economic Review 100, no. 2 (May 2010): 597-602.)
We characterize the optimal (revenue maximizing) auction for sponsored search advertising. We show that a search engine’s optimal reserve price is independent of the number of bidders. Using simulations, we consider the changes that result from a search engine’s choice of reserve price and from changes in the number of participating advertisers.
Internet Filtering in China with Jonathan Zittrain
Zittrain, Jonathan, and Benjamin Edelman. “Internet Filtering in China.” IEEE Internet Computing 7, no. 2 (March/April 2003).
The Chinese government has made few official statements about its filtering of Internet content, but this report explores the scope, depth, and various methods used to selectively bar Internet access through networks in China.
The Effect of Editorial Discretion Book Promotion on Sales at Amazon.com
Edelman, Benjamin. “The Effect of Editorial Discretion Book Promotion on Sales at Amazon.com.” 2002. (Winner of Seymour E. and Ruth B. Harris Prize for outstanding senior honors thesis in economics. Winner of Thomas T. Hoopes Prize awarded for outstanding scholarly work or research.)
A new dataset collected by the author allows estimation of the effect on book sales of promotional listing on Amazon’s editorial discretion pages. Following Goolsbee and Chevalier (2001), sales quantities are inferred from sales rank data freely available on Amazon’s web site, and an automated system tracks which books are promoted when, where, and how often. The results indicate that promotion of books on editorial discretion pages within Amazon’s web site yields increases in sales, and more frequent promotion of a book is associated with larger increases in sales. Increases in sales are greatest for newly-released hardcover books; increases are larger for childrens’ books, books in stock, and books more favorably priced at Amazon than at its foremost competitor, Barnes & Noble. Increases in sales are larger during the period between Thanksgiving and Christmas than before or after the holiday season, and promotion has a larger effect when editorial discretion pages feature only a few books than when they feature many. Finally, the average short-run effect of promotion on one of Amazon’s editorial discretion pages is found to be roughly one third as large as the effect of an appearance in the New York Times Book Review, and the annual sum of Amazon’s editorial discretion promotional activities shows a total short-run impact on sales roughly three fifths as large as the totality of annual Times book reviews.