algo-ad-gsp
Generalized Second Price Auction
Overview
GSP allocates K ad slots to N bidders, assigning the highest bidder the top slot, second-highest the second slot, etc. Each winner pays the bid of the advertiser ONE POSITION BELOW them (per-slot second price). Used by Google Ads and Bing Ads. Runs in O(N log N) for sorting bids.
When to Use
Trigger conditions:
- Understanding search engine ad auction mechanics
- Computing ad position and cost-per-click from bid and quality data
- Analyzing bidding strategy in sponsored search
When NOT to use:
- When you need incentive-compatible truthful bidding (use VCG mechanism)
- When analyzing display/programmatic ad auctions (typically use first-price)
Algorithm
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