A Mechanism for Fair Distribution of Resources with Application to Sponsored Search

There is a rapid shift of advertisement from the traditional media to the Internet. A large portion of the traffic created by publicity is due to search engines through sponsored search. Advertisers pay the search engine to show their content, usually in order to get traffic to their own websites (where they may even feature more publicity). Search engines provide limited space for publicity (i.e. slots) for each keyword search. Since the demand is high they are conducting auctions to determine the advertisers for each keyword search. Designing an auction mechanism one must specify how to assign bidders to goods (or vice versa) and how to set the price for each good won in the auction. This work proposes a new auction mechanism were the slots are distributed among the advertisers depending on how much each advertiser values appearing in a keyword search slot at a specific time. The proposed approach makes payment to the search engine independent of these values. In particular, we propose that payments take the form of a flat fee. We show that this auction mechanism fairly distributes resources (or goods, e.g., slots) in an online fashion, based on the users’ declared preferences, while being socially efficient. While the main motivation for this work was sponsored search, the proposed mechanism can be used in general for the fair distribution of resources in an online fashion among a set of users. Hence, we refer to this mechanism as Fair and Efficient Distribution of Resources (FEDoR). FEDoR can be used even when the auction is done in a distributed fashion (i.e., without central authority), and it provides fairness, social efficiency and incentive compatibility. Essentially, letting the search engine adjust its revenue through the flat fee paid by the advertisers, FEDoR allows it to achieve the maximum gain while being competitive in the search engines’ market.