On optimal mechanisms in the two-item single-buyer unit-demand setting

DOI10.1016/J.JMATECO.2019.01.005MaRDI QIDQ2425139zbMATH OpenOpenAlexWikidataFDO

Authors D. Thirumulanathan, Rajesh Sundaresan, Y. Narahari

Publication date 26 June 2019

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

Full work available at URL https://arxiv.org/abs/1705.01821

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)

Abstract: We consider the problem of designing a revenue-optimal mechanism in the two-item, single-buyer, unit-demand setting when the buyer's valuations, $(z_1,z_2)$, are uniformly distributed in an arbitrary rectangle $[c,c+b_1]imes[c,c+b_2]$ in the positive quadrant. We provide a complete and explicit solution for arbitrary nonnegative values of $(c,b_1,b_2)$. We identify five simple structures, each with at most five (possibly stochastic) menu items, and prove that the optimal mechanism has one of the five structures. We also characterize the optimal mechanism as a function of $b_1,b_2$, and $c$. When $c$ is low, the optimal mechanism is a posted price mechanism with an exclusion region; when $c$ is high, it is a posted price mechanism without an exclusion region. Our results are the first to show the existence of optimal mechanisms with no exclusion region, to the best of our knowledge.

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Cited in

(6)

• A Simple and Approximately Optimal Mechanism for an Additive Buyer
• Optimal mechanisms for selling two items to a single buyer having uniformly distributed valuations
• Strategy-proof multi-object mechanism design: ex-post revenue maximization with non-quasilinear preferences
• Optimal multi-unit mechanisms with private demands
• Optimal mechanism for selling two items to a single buyer having uniformly distributed valuations
• Bulow-Klemperer-Style Results for Welfare Maximization in Two-Sided Markets

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