Abstract
We consider a monopolist seller with n heterogeneous items, facing a single buyer. The buyer has a value for each item drawn independently according to (non-identical) distributions, and her value for a set of items is additive. The seller aims to maximize his revenue. We suggest using the a priori better of two simple pricing methods: selling the items separately, each at its optimal price, and bundling together, in which the entire set of items is sold as one bundle at its optimal price. We show that for any distribution, this mechanism achieves a constant-factor approximation to the optimal revenue. Beyond its simplicity, this is the first computationally tractable mechanism to obtain a constant-factor approximation for this multi-parameter problem. We additionally discuss extensions to multiple buyers and to valuations that are correlated across items.
Original language | English |
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Article number | 24 |
Journal | Journal of the ACM |
Volume | 67 |
Issue number | 4 |
DOIs | |
State | Published - 6 Aug 2020 |
Externally published | Yes |
Bibliographical note
Publisher Copyright:© 2020 ACM.
Keywords
- approximation
- auction design
- Mechanism design
- revenue
- simple vs. optimal