Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/59680
Authors: 
Chawla, Shuchi
Hartline, Jason
Malec, David
Sivan, Balasubramanian
Year of Publication: 
2010
Series/Report no.: 
Discussion Paper, Center for Mathematical Studies in Economics and Management Science 1486
Abstract: 
We consider the classical mathematical economics problem of Bayesian optimal mechanism design where a principal aims to optimize expected revenue when allocating resources to self-interested agents with preferences drawn from a known distribution. In single-parameter settings (i.e., where each agent’s preference is given by a single private value for being served and zero for not being served) this problem is solved. Unfortunately, these single parameter optimal mechanisms are impractical and rarely employed, and furthermore the underlying economic theory fails to generalize to the important, relevant, and unsolved multi-dimensional setting (i.e., where each agent’s preference is given by multiple values for each of the multiple services available). In contrast to the theory of optimal mechanisms we develop a theory of sequential posted price mechanisms, where agents in sequence are offered take-it-or-leave-it prices. We prove that these mechanisms are approximately optimal in single-dimensional settings. These posted-price mechanisms avoid many of the properties of optimal mechanisms that make the latter impractical. Furthermore, these mechanisms generalize naturally to multi-dimensional settings where they give the first known approximations to the elusive optimal multi-dimensional mechanism design problem. In particular, we solve multi-dimensional multi-unit auction problems and generalizations to matroid feasibility constraints. The constant approximations we obtain range from 1.5 to 8. For all but one case, our posted price sequences can be computed in polynomial time. This work can be viewed as an extension and improvement of the single-agent algorithmic pricing work of [10] to the setting of multiple agents where the designer has combinatorial feasibility constraints on which agents can simultaneously obtain each service.
Document Type: 
Working Paper

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