The invisible hand of dynamic market pricing

Vincent Cohen-Addad, Alon Eden, Michal Feldman, Amos Fiat

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

29 Scopus citations

Abstract

Walrasian prices, if they exist, have the property that one can assign every buyer some bundle in her demand set, such that the resulting assignment will maximize social welfare. Unfortunately, this assumes carefully breaking ties amongst different bundles in the buyer demand set. Presumably, the shopkeeper cleverly convinces the buyer to break ties in a manner consistent with maximizing social welfare. Lacking such a shopkeeper, if buyers arrive sequentially and simply choose some arbitrary bundle in their demand set, the social welfare may be arbitrarily bad. In the context of matching markets, we show how to compute dynamic prices, based upon the current inventory, that guarantee that social welfare is maximized. Such prices are set without knowing the identity of the next buyer to arrive. We also show that this is impossible in general (e.g., for coverage valuations), but consider other scenarios where this can be done. We further extend our results to Bayesian and bounded rationality models.

Original languageAmerican English
Title of host publicationEC 2016 - Proceedings of the 2016 ACM Conference on Economics and Computation
PublisherAssociation for Computing Machinery, Inc
Pages383-400
Number of pages18
ISBN (Electronic)9781450339360
DOIs
StatePublished - 21 Jul 2016
Externally publishedYes
Event17th ACM Conference on Economics and Computation, EC 2016 - Maastricht, Netherlands
Duration: 24 Jul 201628 Jul 2016

Publication series

NameEC 2016 - Proceedings of the 2016 ACM Conference on Economics and Computation

Conference

Conference17th ACM Conference on Economics and Computation, EC 2016
Country/TerritoryNetherlands
CityMaastricht
Period24/07/1628/07/16

Bibliographical note

Publisher Copyright:
© Copyright 2016 ACM.

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