Optimal multi-unit mechanisms with private demands

Nikhil R. Devanur, Nima Haghpanah and Alexandros Psomas

Games and Economic Behavior, 2020, vol. 121, issue C, 482-505

Abstract: A seller can produce multiple units of a single good. The buyer has constant marginal value for each unit she receives up to a demand, and zero marginal value for units beyond the demand. The marginal value and the demand are drawn from a distribution and are privately known to the buyer. We show that under natural regularity conditions on the distribution, the optimal (revenue-maximizing) selling mechanism is deterministic. It is a price schedule that specifies the payment based on the number of units purchased. Further, under the same conditions, the revenue as a function of the price schedule is concave, which in turn implies that the optimal price schedule can be found in polynomial time. We give a more detailed characterization of the optimal prices when there are only two possible demands.

Keywords: Mechanism design; Multi-unit demands; Deterministic mechanisms (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:121:y:2020:i:c:p:482-505

DOI: 10.1016/j.geb.2020.03.007

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