algorithm for stochastic multiple-choice knapsack problem and application to keywords bidding
We model budget-constrained keyword bidding in sponsored search auctions as a stochastic multiple-choice knapsack problem (S-MCKP) and design an algorithm to solve S-MCKP and the corresponding bidding optimization problem. Our algorithm selects items online based on a threshold function which can be built/updated using historical data. Our algorithm achieved about 99\% performance compared to the offline optimum when applied to a real bidding dataset. With synthetic dataset and iid item-sets, its performance ratio against the offline optimum converges to one empirically with increasing number of periods.
multiple-choice knapsack problem keyword bidding sponsored search auction stochastic optimization