We consider a GSP auction with four bidders, A, B, C and D. Since there are...

We consider a GSP auction with four bidders, A, B, C and D. Since there are four bidders only the three highest bidders will be displayed). The click frequency of the first, second and third positions are 100 clicks/hour, 75 clicks/hour and 35 clicks/hour, respectively. Bidders’valuation per click are vA = 10, vB = 6, vC = 4, vD = 3. Bidder B, C and D bid 5, 3 and 1, respectively.

What is the optimal bid for A?

Expert Solution

The generalized second-price auction (GSP) is a non-truthful auction mechanism for multiple items. Each bidder places a bid. The highest bidder gets the first slot, the second-highest, the second slot and so on, but the highest bidder pays the price bid by the second-highest bidder, the second-highest pays the price bid by the third-highest, and so on.

We say the utility of bidder who is allocated to the slot is

Rahul Sunny answered 8 months ago

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