Coopetitive Ad Auctions

Abstract

A single advertisement often benefits many parties, for example, an ad for a Samsung laptop benefits Microsoft. We study this phenomenon in search advertising auctions and show that standard solutions, including the status quo ignorance of mutual benefit and a benefit-aware Vickrey-Clarke-Groves mechanism, perform poorly. In contrast, we show that an appropriate first-price auction has nice equilibria in a single-slot ad auction --- all equilibria that satisfy a natural cooperative envy-freeness condition select the welfare-maximizing ad and satisfy an intuitive lower-bound on revenue.