Theoretical and experimental investigations of the performance of keyword auction mechanisms

Emiko Fukuda*, Yoshio Kamijo, Ai Takeuchi, Michiharu Masui, Yukihiko Funaki

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

16 Citations (Scopus)


Two keyword auction mechanisms, the Generalized Second-Price auction (GSP) and the Vickrey-Clarke-Groves mechanism (VCG), were compared theoretically and experimentally. The former is widely used in practice; the latter is not, but it has a dominant strategy equilibrium where all participants bid their true values. In the theoretical investigation, by applying the "locally envy-free Nash equilibrium" to the VCG, we found that the allocations are efficient and that upper and lower bounds of the auctioneer's revenue coincide in the two mechanisms. A laboratory experiment, in which the revenues and efficiencies were similar in both mechanisms, supported this result.

Original languageEnglish
Pages (from-to)438-461
Number of pages24
JournalRAND Journal of Economics
Issue number3
Publication statusPublished - 2013 Sept

ASJC Scopus subject areas

  • Economics and Econometrics


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