Abstract
We propose a keyword auction protocol called the GSP-ExR (GSP with an exclusive right) in which the number of advertisements displayed around search results can be dynamically adjusted. It is an extension of the generalized second-price (GSP) auction, which is currently used for keyword auctions. However, in the GSP, the number of displayed advertisements (slots) is determined in advance. We consider adjusting the number of advertisements dynamically on the basis of the bids to improve both the social surplus and seller's revenue. In the GSP-ExR, the number of slots can be either 1 or K. The GSP-ExR pricing scheme is relatively simple and the seller's revenue is at least as good as that with the GSP. If the highest ranked bidder's bid is high enough, she can exclusively display her advertisement by paying a premium. Otherwise, the GSP-ExR is identical to the GSP.