2026/08/03 by Emerson Melo, Matt Shum, Rakesh Vohra
Economics, Econometrics and Finance · #econ.TH
arxiv created 2026/08/03 · arxiv updated 2026/08/04
Per-impression auctions have long served as the allocation mechanism in online advertising. We argue that in ``hands-off-the-wheel'' (HOTW) markets, where advertisers declare budgets and ``return-on-investment'' (ROI) targets and the exchange's ML models predict click values, auctions are no longer necessary: all information required for optimal pricing is already known to the exchange, which occupies the position of a monopolist pricing against a downward-sloping demand curve. A HOTW market is a Fisher market, whose competitive equilibrium can be computed via the convex program of Eisenberg and Gale, yielding market-clearing prices and allocations satisfying all budget and ROI constraints simultaneously. This competitive-equilibrium price is revenue-optimal for the exchange among all uniform-price mechanisms: avoiding the demand reduction problem in typical uniform-price multi-unit auctions. The resulting competitive equilibrium is moreover outcome-equivalent to sequential first-price auctions with pacing, with pacing multipliers computable ex-ante by the exchange. This one-shot approach replaces millions of individual auctions with one convex program, which is not only operationally simpler than dynamically evolving bidding strategies, but revenue-optimal for the exchange, while delivering the same equilibrium outcome.