Autobidding Auctions in the Presence of User Costs

TL;DR

This paper investigates autobidding ad auctions with user costs, revealing limitations of standard VCG auctions and proposing new variants with improved social welfare guarantees.

Contribution

It introduces a novel VCG-based auction variant with cost multipliers that achieve better approximation ratios for social welfare in the presence of user costs.

Findings

Standard VCG can have zero approximation ratio with user costs.

Proposed VCG variants guarantee at least 1/2 and 1/4 social welfare approximation.

New auction design improves efficiency in user-cost-aware autobidding scenarios.

Abstract

We study autobidding ad auctions with user costs, where each bidder is value-maximizing subject to a return-over-investment (ROI) constraint, and the seller aims to maximize the social welfare taking into consideration the user's cost of viewing an ad. We show that in the worst case, the approximation ratio of social welfare by running the vanilla VCG auctions with user costs could as bad as 0. To improve the performance of VCG, We propose a new variant of VCG based on properly chosen cost multipliers, and prove that there exist auction-dependent and bidder-dependent cost multipliers that guarantee approximation ratios of 1/2 and 1/4 respectively in terms of the social welfare.