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A Simple and Approximately Optimal Mechanism for an Additive Buyer

Author(s): Babaioff, Moshe; Immorlica, Nicole; Lucier, Brendan; Weinberg, S Matthew

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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.
Publication Date: Jun-2020
Citation: Babaioff, Moshe, Nicole Immorlica, Brendan Lucier, and S. Matthew Weinberg. "A Simple and Approximately Optimal Mechanism for an Additive Buyer." Journal of the ACM 67, no. 4 (2020): 24:1-24:40. doi:10.1145/3398745
DOI: 10.1145/3398745
ISSN: 0004-5411
EISSN: 1557-735X
Pages: 24:1 - 24:40
Type of Material: Journal Article
Journal/Proceeding Title: Journal of the ACM
Version: Author's manuscript

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