Optimal mechanisms for selling two items to a single buyer having uniformly distributed valuations

DOI10.1016/J.JMATECO.2019.01.004zbMATH Open1417.91257arXiv1610.06718OpenAlexW3103051861WikidataQ128505116 ScholiaQ128505116MaRDI QIDQ2425138FDOQ2425138

Authors: D. Thirumulanathan, Rajesh Sundaresan, Y. Narahari 

Publication date: 26 June 2019

Published in: Journal of Mathematical Economics (Search for Journal in Brave)

Abstract: We consider the design of a revenue-optimal mechanism when two items are available to be sold to a single buyer whose valuation is uniformly distributed over an arbitrary rectangle $[c_1,c_1+b_1]imes[c_2,c_2+b_2]$ in the positive quadrant. We provide an explicit, complete solution for arbitrary nonnegative values of $(c_1,c_2,b_1,b_2)$. We identify eight simple structures, each with at most $4$ (possibly stochastic) menu items, and prove that the optimal mechanism has one of these eight structures. We also characterize the optimal mechanism as a function of $(c_1,c_2,b_1,b_2)$. The structures indicate that the optimal mechanism involves (a) an interplay of individual sale and a bundle sale when $c_1$ and $c_2$ are low, (b) a bundle sale when $c_1$ and $c_2$ are high, and (c) an individual sale when one of them is high and the other is low. To the best of our knowledge, our results are the first to show the existence of optimal mechanisms with no exclusion region. We further conjecture, based on promising preliminary results, that our methodology can be extended to a wider class of distributions.

Full work available at URL: https://arxiv.org/abs/1610.06718

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zbMATH Keywords

convex optimizationgame theoryeconomicsstochastic ordersoptimal auctions

Mathematics Subject Classification ID

Applications of game theory (91A80) Auctions, bargaining, bidding and selling, and other market models (91B26)

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• Optimal mechanism for selling two items to a single buyer having uniformly distributed valuations

Cited In (4)

• On optimal mechanisms in the two-item single-buyer unit-demand setting
• Selling two identical objects
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• Optimal mechanism for selling two items to a single buyer having uniformly distributed valuations

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