Audited Auctions: Reducing Harms in Advertising

Tejovan Parker; Gabriel McDonnell Maayan; Francisco Marmolejo-Cossío; Marshall Van Alstyne

Audited Auctions: Reducing Harms in Advertising

Computer Science and Game Theory 2026-07-18 v1

Authors: Tejovan Parker , Gabriel McDonnell Maayan , Francisco Marmolejo-Cossío , Marshall Van Alstyne

Abstract

Although standard auction mechanisms help truthfully reveal preferences of bidders, they can inadvertently result in unbounded harms when they fail to account for externalities caused by bid allocations affecting non-bidders. Ad markets, that buy and sell user attention represent such auctions. This research explores a welfare improving auctioneer's audit-and-penalty mechanism that helps screen the worst externalities. We prove this mechanism can internalize externalities formally, then explore social welfare gains empirically.

Keywords

auction design externality audit and penalty mechanism advertising market social welfare mechanism design

Cite

@article{arxiv.2607.16586,
  title  = {Audited Auctions: Reducing Harms in Advertising},
  author = {Tejovan Parker and Gabriel McDonnell Maayan and Francisco Marmolejo-Cossío and Marshall Van Alstyne},
  journal= {arXiv preprint arXiv:2607.16586},
  year   = {2026}
}