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Constrained signaling for welfare and revenue maximization

Constrained signaling for welfare and revenue maximization Constrained Signaling for Welfare and Revenue Maximization SHADDIN DUGHMI University of Southern California and NICOLE IMMORLICA Microsoft Research and AARON ROTH University of Pennsylvania We consider auction settings where the seller is constrained in the amount and nature of information he may reveal about the good being sold. This is encountered, for example, in online advertising auctions, where communicating precise details of every viewer to interested advertisers is impractical, costly, and possibly socially undesirable. We initiate the study of constrained signaling in such settings, where a seller must choose which information to reveal subject to exogenous constraints on the signaling policy. We consider a seller employing the second-price auction, and present algorithms and hardness results for approximating the welfare and revenue maximizing signaling policies under a variety of constraints. Categories and Subject Descriptors: F.2.2 [Analysis of Algorithms and Problem Complexity]: General General Terms: Algorithms, Economics, Theory Additional Key Words and Phrases: Signaling, Auctions, Mechanism Design 1. INTRODUCTION The study of economic interactions in the presence of information asymmetries has a rich history, beginning with the seminal work of [Akerlof 1970]. Akerlof observed that the information structure of a market -- i.e. who has what information regarding the goods http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png ACM SIGecom Exchanges Association for Computing Machinery

Constrained signaling for welfare and revenue maximization

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Publisher
Association for Computing Machinery
Copyright
Copyright © 2013 by ACM Inc.
ISSN
1551-9031
DOI
10.1145/2509013.2509022
Publisher site
See Article on Publisher Site

Abstract

Constrained Signaling for Welfare and Revenue Maximization SHADDIN DUGHMI University of Southern California and NICOLE IMMORLICA Microsoft Research and AARON ROTH University of Pennsylvania We consider auction settings where the seller is constrained in the amount and nature of information he may reveal about the good being sold. This is encountered, for example, in online advertising auctions, where communicating precise details of every viewer to interested advertisers is impractical, costly, and possibly socially undesirable. We initiate the study of constrained signaling in such settings, where a seller must choose which information to reveal subject to exogenous constraints on the signaling policy. We consider a seller employing the second-price auction, and present algorithms and hardness results for approximating the welfare and revenue maximizing signaling policies under a variety of constraints. Categories and Subject Descriptors: F.2.2 [Analysis of Algorithms and Problem Complexity]: General General Terms: Algorithms, Economics, Theory Additional Key Words and Phrases: Signaling, Auctions, Mechanism Design 1. INTRODUCTION The study of economic interactions in the presence of information asymmetries has a rich history, beginning with the seminal work of [Akerlof 1970]. Akerlof observed that the information structure of a market -- i.e. who has what information regarding the goods

Journal

ACM SIGecom ExchangesAssociation for Computing Machinery

Published: Jun 1, 2013

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