Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/150151
Authors: 
Moldovanu, Benny
Dizdar, Deniz
Gershkov, Alex
Year of Publication: 
2011
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 6 [Year:] 2011 [Issue:] 2 [Pages:] 157-184
Abstract: 
We analyze maximization of revenue in the dynamic and stochastic knapsack problem where a given capacity needs to be allocated by a given deadline to sequentially arriving agents. Each agent is described by a two-dimensional type that reflects his capacity requirement and his willingness to pay per unit of capacity. Types are private information. We first characterize implementable policies. Then we solve the revenue maximization problem for the special case where there is private information about per-unit values, but capacity needs are observable. After that we derive two sets of additional conditions on the joint distribution of values and weights under which the revenue maximizing policy for the case with observable weights is implementable, and thus optimal also for the case with two-dimensional private information. In particular, we investigate the role of concave continuation revenues for implementation. We also construct a simple policy for which per-unit prices vary with requested weight but not with time, and prove that it is asymptotically revenue maximizing when available capacity/ time to the deadline both go to infinity. This highlights the importance of nonlinear as opposed to dynamic pricing.
Subjects: 
Knapsack
revenue maximization
dynamic mechanism design
JEL: 
D42
D44
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Article

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