Why Study Game Theory when it has Limited Practical Applications in Real Life?
As discussed in lecture material, game theory does in fact have limited practical applications in real life. The Ultimatum Game is a prime example of this. Game theory operates behind the assumption that players are “rational”, meaning that they strictly prefer larger payoffs than smaller payoffs. On paper, payoffs are only represented by the monetary […]
Internet Advertising and the Generalized Second-Price Auction
This paper talks about a new auction mechanism, which we call the “generalized second-price” auction, or GSP. When an Internet user enters a search term (“query”) into a search engine, he gets back a page with results, containing both the links most relevant to the query and the sponsored links, i.e., paid advertisements. This means that advertisers […]