{"title":"Convexity in Real-time Bidding and Related Problems","authors":"R. Kinnear, Ravi R. Mazumdar, Peter Marbach","doi":"10.1145/3656552","DOIUrl":null,"url":null,"abstract":"We study problems arising in real-time auction markets, common in e-commerce and computational advertising, where bidders face the problem of calculating optimal bids. We focus upon a contract management problem where a demand aggregator is subject to multiple contractual obligations requiring them to acquire items of heterogeneous types at a specified rate and where they will seek to fulfill these obligations at minimum cost. Our main results show that, through a transformation of variables, this problem can be formulated as a convex optimization problem, for both first and second price auctions. The resulting duality theory admits rich structure and interpretations. Additionally, we show that the transformation of variables can be used to guarantee the convexity of optimal bidding problems studied by other authors, who did not leverage convexity in their analysis. The main point of our work is to emphasize that the natural convexity properties arising in first and second price auctions are not being fully exploited. Finally, we show direct analogies to problems in financial markets: the expected cost of bidding in second price auctions is formally identical to certain transaction costs when submitting market orders, and that a related conjugate function arises in dark pool financial markets.","PeriodicalId":1,"journal":{"name":"Accounts of Chemical Research","volume":"1 7","pages":""},"PeriodicalIF":16.4000,"publicationDate":"2024-04-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Accounts of Chemical Research","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1145/3656552","RegionNum":1,"RegionCategory":"化学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"CHEMISTRY, MULTIDISCIPLINARY","Score":null,"Total":0}
引用次数: 0
Abstract
We study problems arising in real-time auction markets, common in e-commerce and computational advertising, where bidders face the problem of calculating optimal bids. We focus upon a contract management problem where a demand aggregator is subject to multiple contractual obligations requiring them to acquire items of heterogeneous types at a specified rate and where they will seek to fulfill these obligations at minimum cost. Our main results show that, through a transformation of variables, this problem can be formulated as a convex optimization problem, for both first and second price auctions. The resulting duality theory admits rich structure and interpretations. Additionally, we show that the transformation of variables can be used to guarantee the convexity of optimal bidding problems studied by other authors, who did not leverage convexity in their analysis. The main point of our work is to emphasize that the natural convexity properties arising in first and second price auctions are not being fully exploited. Finally, we show direct analogies to problems in financial markets: the expected cost of bidding in second price auctions is formally identical to certain transaction costs when submitting market orders, and that a related conjugate function arises in dark pool financial markets.
期刊介绍:
Accounts of Chemical Research presents short, concise and critical articles offering easy-to-read overviews of basic research and applications in all areas of chemistry and biochemistry. These short reviews focus on research from the author’s own laboratory and are designed to teach the reader about a research project. In addition, Accounts of Chemical Research publishes commentaries that give an informed opinion on a current research problem. Special Issues online are devoted to a single topic of unusual activity and significance.
Accounts of Chemical Research replaces the traditional article abstract with an article "Conspectus." These entries synopsize the research affording the reader a closer look at the content and significance of an article. Through this provision of a more detailed description of the article contents, the Conspectus enhances the article's discoverability by search engines and the exposure for the research.