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Bidding to the Top: Position-based Auctions - page 11 / 23

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Vickrey-Clarke-Groves (VCG) Auction

VCG is a generic truthful mechansim:

Allocation = the one that maximizes social welfare or total value (assuming value = bid)

Price (i ) = cost imposed by i  on others

                 = total increase in others’ value if i  were to disappear.

To run VCG for prefix auctions:

Find max-value cutoff-respecting matching of ads to positions.

For each advertiser i ,

Remove i from the pool of advertisers.

Recalculate max matching.

Set price(i ) = value of all other advertisers.

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