Equilibrium Bidding Strategy for Gsp Keyword Auctions

The generalized second-pri ce (G SP) mech anism is th e mo st wid ely-used au ction format in sponsored search markets . However , figuring ou t how to bi d on GSP auctions presents major theoretical and computational challenges due to the complex nature of the auction format and the infinite nu mber o f equ ilibria. Ou r stud y cha racterizes vario us eq uilibrium bidding behaviors in GSP auctions. We develop an algorithm t o identify all pure-strategy Nash equilibria and discuss their d istribution in th e pure-strategy sp ace. Th is eq uilibrium d istribution can h elp advertisers formulate bidding strategies, and help search engines calculate their expected revenues.