Budget-Management Strategies in Repeated Auctions

Managing Advertisers’ Budgets in Online Advertising Platforms Most online advertising platforms sell ad placements using repeated auctions. Platforms often provide budget-management strategies that allow advertisers to control their cumulative expenditures: Advertisers declare the maximum daily amount they are willing to pay, and the platform adjusts allocations and payments to guarantee that cumulative expenditures do not exceed budgets. Many strategies can be used to accommodate budget constraints, and each one, when applied to all budget-constrained advertisers simultaneously, drives the system toward a different equilibrium. For example, platforms can modify the advertisers’ bids or the auctions’ allocation and payment rules. In “Budget-Management Strategies in Repeated Auctions,” Balseiro, Kim, Mahdian, and Mirrokni compare the equilibrium outcome of a range of budget-management strategies used in practice. They study the impact of budget-management strategies on the trade-off between the seller’s profit and buyers’ utility and shed light on the incentive properties of budget-management strategies. In online advertising, advertisers purchase ad placements by participating in a long sequence of repeated auctions. One of the most important features that advertising platforms often provide and advertisers often use is budget management, which allows advertisers to control their cumulative expenditures. Advertisers typically declare the maximum daily amount they are willing to pay, and the platform adjusts allocations and payments to guarantee that cumulative expenditures do not exceed budgets. There are multiple ways to achieve this goal, and each one, when applied to all budget-constrained advertisers simultaneously, drives the system toward a different equilibrium. Our goal is to compare the “system equilibria” of a range of budget-management strategies. In particular, we consider six different budget-management strategies, including probabilistic throttling, thresholding, bid shading, reserve pricing, and two versions of multiplicative boosting. We show that these methods admit a system equilibrium, study their incentive properties, prove dominance relations among them in a simplified setting, and confirm our theoretical findings using real ad auction data from a sponsored search. Our study sheds light on the impact of budget-management strategies on the trade-off between the seller’s profit and buyers’ utility and may be of practical relevance for ad