Audited Auctions: Reducing Harms in Advertising
Although standard auction mechanisms help truthfully reveal preferences of bidders, they can inadvertently result in unbounded harms when they fail to account for externalities caused by bid allocations affecting non-bidders. Ad markets, that buy and sell user attention represent such auctions. This research explores a welfare improving auctioneer's audit-and-penalty mechanism that helps screen the worst externalities. We prove this mechanism can internalize externalities formally, then explore social welfare gains empirically.
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