The optimal mechanism for selling to a budget-constrained buyer: The general case

Nikhil R. Devanur, Seth Matthew Weinberg

Research output: Chapter in Book/Report/Conference proceedingConference contribution

7 Scopus citations

Abstract

We consider a revenue-maximizing seller with a single item facing a single buyer with a private budget. .e (value, budget) pair is drawn from an arbitrary and possibly correlated distribution. We characterize the optimal mechanism in such cases, and quantify the amount of price discrimination that might be present. For example, there could be up to 3 . 2k-1- 1 distinct non-Trivial menu options in the optimal mechanism for such a buyer with k distinct possible budgets (compared to k if the marginal distribution of values conditioned on each budget has decreasing marginal revenue [CG00], or 2 if there is an arbitrary distribution and one possible budget [CMM11]). Our approach makes use of the duality framework of [CDW16], and duality techniques related to the "FedEx Problem" of [FGKK16]. In contrast to [FGKK16] and other prior work, we characterize the optimal primal/dual without nailing down an explicit closed form.

Original languageEnglish (US)
Title of host publicationEC 2017 - Proceedings of the 2017 ACM Conference on Economics and Computation
PublisherAssociation for Computing Machinery, Inc
Pages39-40
Number of pages2
ISBN (Electronic)9781450345279
DOIs
StatePublished - Jun 20 2017
Event18th ACM Conference on Economics and Computation, EC 2017 - Cambridge, United States
Duration: Jun 26 2017Jun 30 2017

Publication series

NameEC 2017 - Proceedings of the 2017 ACM Conference on Economics and Computation

Other

Other18th ACM Conference on Economics and Computation, EC 2017
CountryUnited States
CityCambridge
Period6/26/176/30/17

All Science Journal Classification (ASJC) codes

  • Computer Science (miscellaneous)
  • Statistics and Probability
  • Computational Mathematics
  • Economics and Econometrics

Keywords

  • Budgets
  • Revenue maximization

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  • Cite this

    Devanur, N. R., & Weinberg, S. M. (2017). The optimal mechanism for selling to a budget-constrained buyer: The general case. In EC 2017 - Proceedings of the 2017 ACM Conference on Economics and Computation (pp. 39-40). (EC 2017 - Proceedings of the 2017 ACM Conference on Economics and Computation). Association for Computing Machinery, Inc. https://doi.org/10.1145/3033274.3085132