Individual Welfare Guarantees in the Autobidding World with Machine-learned Advice

Yuan Deng, Negin Golrezaei, Patrick Jaillet, Jason Cheuk Nam Liang, Vahab Mirrokni

Keywords: Individual welfare guarantee, mechanism design, machine-learned advice, welfare maximization

Abstract:

Online advertising channels have commonly focused on maximizing total advertiser value (or welfare) to enhance long-run retention and channel healthiness. Previous literature has studied auction design by incorporating machine learning predictions on advertiser values (also known as machine-learned advice) through various forms to improve total welfare. Yet, such improvements could come at the cost of individual bidders' welfare and do not shed light on how particular advertiser bidding strategies impact welfare.

Motivated by this, we present an analysis on an individual bidder's welfare loss in the autobidding world for auctions with and without machine-learned advice, and also uncover how advertiser strategies relate to such losses. In particular, we demonstrate how ad platforms can utilize ML advice to improve welfare guarantee on the aggregate and individual bidder level by setting ML advice as personalized reserve prices when the platform consists of \textit{autobidders} who maximize value while respecting a return-on-ad spent (ROAS) constraint. Under parallel VCG auctions with such ML advice-based reserves, we present a worst-case welfare lower-bound guarantee for an individual autobidder, and show that the lower-bound guarantee is positively correlated with ML advice quality as well the scale of bids induced by the autobidder's bidding strategies. Further, we prove an impossibility result showing that no truthful, and possibly randomized mechanism with anonymous allocations can achieve universally better individual welfare guarantees than VCG, in presence of personalized reserves based on ML-advice of equal quality. Moreover, we extend our individual welfare guarantee results to generalized first price (GFP) and generalized second price (GSP) auctions. Finally, we present numerical studies using semi-synthetic data derived from ad auction logs of a search ad platform to showcase improvements in individual welfare when setting personalized reserve prices with ML-advice.

Track: COI (submissions co-authored by SAC)

Submission Guidelines Scope: Yes

Submission Guidelines Blind: Yes

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Student Author: No

Submission Number: 2070