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

DOI10.1016/J.JMATECO.2019.01.005zbMATH Open1417.91258arXiv1705.01821OpenAlexW3101612362WikidataQ128456261 ScholiaQ128456261MaRDI QIDQ2425139FDOQ2425139

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 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.

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

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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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Cited In (4)

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

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