User Response in Ad Auctions: An MDP Formulation of Long-Term Revenue Optimization

arXiv:2302.08108v2 Announce Type: replace-cross
Abstract: We propose a new Markov Decision Process (MDP) model for ad auctions to capture the user response to the quality of ads, with the objective of maximizing the long-term discounted revenue. By incorporating user response, our model takes into consideration all three parties involved in the auction (advertiser, auctioneer, and user). The state of the user is modeled as a user-specific click-through rate (CTR) with the CTR changing in the next round according to the …

abstract ads arxiv cs.gt cs.lg decision long-term markov optimization parties process quality revenue type