Ad vs Organic: Revisiting Incentive Compatible Mechanism Design in E-commerce Platforms

Ningyuan Li, Yunxuan Ma, Yang Zhao, Qian Wang, Zhilin Zhang, Chuan Yu, Jian Xu, Bo Zheng, Xiaotie Deng

Keywords: E-Commerce, Mechanism Design, Online Advertising, Competitive Ratio

TL;DR: We revisit the mechanism design about integrating ad and organic items, under the situation that a product can be displayed as either ad or organic item, which causes incentive problem in most existing works.

Abstract: On typical e-commerce platforms, a product can be dislayed to the user in two possible forms, as an ad item or an organic item. Usually ad and organic items are selected separately by the advertising system and recommendation system, and then combined by a merging mechanism. Although the design of the merging mechanism have been extensively studied, little attention has been paid to a critical situation that arises when the set of candidate ad items and organic items overlap. Despite its common occurrence, this situation is not correctly handled by almost all existing works, potentially causing incentive problems for advertisers and violation of economic constraints. To this end, we revisit the design of the merging mechanism. We identify a necessary property called form stability, and provide simplification results of the mechanism design problem. Moreover, we design simple mechanisms strictly ensuring economic properties such as incentive compatibility, and demonstrate that they are approximately optimal under certain assumptions.

Track: Economics, Online Markets, and Human Computation

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Submission Number: 1932