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Experimental Results on Sponsored Search Auction: Comparison of GSP and VCG

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Sponsored links are a kind of Internet ads and its market has grown rapidly in recent years. This paper compares, using laboratory experiment, the performance of two auction rules for sponsored links; Vickrey-Clarke-Groves mechanism (VCG), which is an incentive compatible mechanism with dominant strategy equilibrium; and ¡Ègeneralized second price¡É auction (GSP), which is commonly used by the major search engines. In the experiment, we observed no difference in the distribution of the revenues for a search engine in VCG and GSP, and equilibrium outcomes resulted more frequently in VCG.
Furthermore, outcomes in VCG were more efficient than the outcomes of GSP.

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