Keyword Auction Protocol for Dynamically Adjusting the Number of Advertisements

Search engines including Yahoo! and Google utilize a keyword auction for ranking the advertisements displayed around the search results. In existing keyword auctions called the GSP, the number of displayed advertisements (slots) is determined in advance. Therefore, we consider adjusting the number of advertisements dynamically based on bids in order to improve both social surplus and seller´s revenue. For example, we allow a bidder to display her advertisement exclusively when she is willing to pay a premium. We propose a new keyword auction protocol called the GSP-ExR in which the number of slots can be either 1 or K. The GSP-ExR pricing scheme is relatively simple and the seller´s revenue is at least as good as with the GSP. If the highest ranked bidder´s bid is large enough, she can exclusively display her advertisement by paying a premium.Otherwise, the GSP-ExR is identical to the GSP.