Optimal Bidding Strategy without Exploration in Real-time Bidding

Maximizing utility with a budget constraint is the primary goal for advertisers in real-time bidding (RTB) systems. The policy maximizing the utility is referred to as the optimal bidding strategy. Earlier works on optimal bidding strategy apply model-based batch reinforcement learning methods which can not generalize to unknown budget and time constraint. Further, the advertiser observes a censored market price which makes direct evaluation infeasible on batch test datasets. Previous works ignore the losing auctions to alleviate the difficulty with censored states; thus significantly modifying the test distribution. We address the challenge of lacking a clear evaluation procedure as well as the error propagated through batch reinforcement learning methods in RTB systems. We exploit two conditional independence structures in the sequential bidding process that allow us to propose a novel practical framework using the maximum entropy principle to imitate the behavior of the true distribution observed in real-time traffic. Moreover, the framework allows us to train a model that can generalize to the unseen budget conditions than limit only to those observed in history. We compare our methods on two real-world RTB datasets with several baselines and demonstrate significantly improved performance under various budget settings.