Auctions with intermediaries

Jon Feldman, Vahab Mirrokni, S. Muthukrishnan, Mallesh M. Pai

    Research output: Chapter in Book/Report/Conference proceedingConference contribution

    Abstract

    Inspired by online advertisement exchange systems, we study a setting where potential buyers of a unique, indivisible good attempt to purchase from a central seller via a set of intermediaries. Each intermediary has captive buyers, and runs an auction for a 'contingent' good. Based on the outcome, the intermediary bids in a subsequent upstream auction run by the seller. In this paper, we study the equilibria and incentives of intermediaries and the central seller. We find that combining the notion of optimal auction design with the double-marginalization arising from the presence of intermediaries yields new strategic elements not present in either setting individually: we show that in equilibrium, revenue-maximizing intermediaries will use an auction with a randomized reserve price chosen from an interval. We characterize the interval and the probability distribution from which this reserve price is chosen as a function of the distribution of buyers' types. Furthermore, we characterize the revenue maximizing auction for the central seller by taking into account the effect of his choice of mechanism on the mechanisms offered by the intermediaries. We find that the optimal reserve price offered by the seller decreases with the number of buyers (but remains strictly positive); in contrast to the classical optimal auction without intermediaries, where the reserve price is independent of the number of buyers.

    Original languageEnglish (US)
    Title of host publicationEC'10 - Proceedings of the 2010 ACM Conference on Electronic Commerce
    Pages23-32
    Number of pages10
    DOIs
    StatePublished - Jul 23 2010
    Event11th ACM Conference on Electronic Commerce, EC'10 - Cambridge, MA, United States
    Duration: Jun 7 2010Jun 11 2010

    Publication series

    NameProceedings of the ACM Conference on Electronic Commerce

    Conference

    Conference11th ACM Conference on Electronic Commerce, EC'10
    CountryUnited States
    CityCambridge, MA
    Period6/7/106/11/10

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    Keywords

    • ad exchanges
    • intermediaries
    • optimal auctions

    ASJC Scopus subject areas

    • Software
    • Computer Science Applications
    • Computer Networks and Communications

    Cite this

    Feldman, J., Mirrokni, V., Muthukrishnan, S., & Pai, M. M. (2010). Auctions with intermediaries. In EC'10 - Proceedings of the 2010 ACM Conference on Electronic Commerce (pp. 23-32). (Proceedings of the ACM Conference on Electronic Commerce). https://doi.org/10.1145/1807342.1807346