Bayesian optimal knapsack procurement

Ludwig Ensthaler and Thomas Giebe

European Journal of Operational Research, 2014, vol. 234, issue 3, 774-779

Abstract: A budget-constrained buyer wants to purchase items from a shortlisted set. Items are differentiated by observable quality and sellers have private reserve prices for their items. The buyer’s problem is to select a subset of maximal quality. Money does not enter the buyer’s objective function, but only his constraints. Sellers quote prices strategically, inducing a knapsack game. We report the Bayesian optimal mechanism for the buyer’s problem. We find that simultaneous take-it-or-leave-it offers are interim optimal.

Keywords: Game theory; Mechanism design; Knapsack problem; Subsidies; Budget; Procurement (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:234:y:2014:i:3:p:774-779

DOI: 10.1016/j.ejor.2013.09.031

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