Generalized Second Price Auction, also known as Ad Word auction, and its variants have been the main mechanism used by search companies to auction positions for sponsored search links. In this talk we study the social welfare of the Nash equilibria of this game (both in the full information model and in the Bayesian setting) compared to the expected value of the optimal social welfare, and show that under reasonable assumption all Nash equilibria have high social welfare, i.e., the Price of Anarchy is low. Our proof exhibits a combinatorial structure of Nash equilibria and use this structure to bound the price of anarchy.
Joint work with Renato Paes Leme.