Dynamic cost-per-action mechanisms and applications to online advertising

We study the Cost-Per-Action or Cost-Per-Acquisition (CPA) charging scheme in online advertising. In this scheme, instead of paying per click, the advertisers pay only when a user takes a specific action (e.g. fills out a form) or completes a transaction on their websites. We focus on designing efficient and incentive compatible mechanisms that use this charging scheme. We describe a mechanism based on a sampling-based learning algorithm that under suitable assumptions is asymptotically individually rational, asymptotically Bayesian incentive compatible and asymptotically ex-ante efficient. In particular, we demonstrate our mechanism for the case where the utility functions of the advertisers are independent and identically-distributed random variables as well as the case where they evolve like independent reflected Brownian motions. Categories and Subject Descriptors J.4 [Social and Behavioral Sciences]: Economics; F.2.0 [Analysis of Algorithms and Problem Complexity]: General; I.2.6...

• Type: Conference
• Year: 2008
• Where: WWW
• Authors: Hamid Nazerzadeh, Amin Saberi, Rakesh Vohra
• Keywords: Incentive Compatible Mechanisms, Internet Technology, Sampling-based Learning Algorithm, Theory Keywords Mechanism, WWW 2008