Pricing Ad Slots with Consecutive Multi-unit Demand

Abstract

We consider the optimal pricing problem for a model of the rich media advertisement market, as well as other related applications. In this market, there are multiple buyers (advertisers), and items (slots) that are arranged in a line such as a banner on a website. Each buyer desires a particular number of consecutive slots and has a per-unit-quality value v _i (dependent on the ad only) while each slot j has a quality q _j (dependent on the position only such as click-through rate in position auctions). Hence, the valuation of the buyer i for item j is v _i q _j . We want to decide the allocations and the prices in order to maximize the total revenue of the market maker.

A key difference from the traditional position auction is the advertiser’s requirement of a fixed number of consecutive slots. Consecutive slots may be needed for a large size rich media ad. We study three major pricing mechanisms, the Bayesian pricing model, the maximum revenue market equilibrium model and an envy-free solution model. Under the Bayesian model, we design a polynomial time computable truthful mechanism which is optimum in revenue. For the market equilibrium paradigm, we find a polynomial time algorithm to obtain the maximum revenue market equilibrium solution. In envy-free settings, an optimal solution is presented when the buyers have the same demand for the number of consecutive slots. We conduct a simulation that compares the revenues from the above schemes and gives convincing results.

The full version of the paper is available at: http://arxiv.org/abs/1308.1382