We study optimal bidding strategies for advertisers in budget constrained multi-item multi-slot auctions. The classic application context is that of bidding in sponsored search auctions. In general, these auctions are run as variants of second-price auctions but have been shown to be incentive incompatible. Thus advertisers have to be strategic about bidding. Uncertainty in the decision-making environment, budget constraints and the presence of a large portfolio of candidate keywords makes the optimization problem nontrivial. We first present an analytical model to characterize the optimal bidding strategy and illustrate its application using real-world data. We find that the proposed strategies are very effective in practice.
In 1908, the Welsh neurologist and psychoanalyst Ernest Jones described human beings as rationalizers whose behavior is governed by "the necessity of providing an explanation." We construct a formal and testable model of rationalization in which a decision maker selects her preferred alternative from among those that she can rationalize.
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