A Simple Mechanism for a Budget-Constrained Buyer

Conference Paper

We study a classic Bayesian mechanism design setting of monopoly problem for an additive buyer in the presence of budgets. In this setting, a monopolist seller with m heterogeneous items faces a single buyer and seeks to maximize her revenue. The buyer has a budget and additive valuations drawn independently for each item from (non-identical) distributions. We show that when the buyer's budget is publicly known, it is better to sell each item separately; selling the grand bundle extracts a constant fraction of the optimal revenue. When the budget is private, we consider a standard Bayesian setting where buyer's budget b is drawn from a known distribution B. We show that if b is independent of the valuations (which is necessary) and distribution B satisfies monotone hazard rate condition, then selling items separately or in a grand bundle is still approximately optimal.

Full Text

Duke Authors

Cited Authors

  • Cheng, Y; Gravin, N; Munagala, K; Wang, K

Published Date

  • May 1, 2021

Published In

Volume / Issue

  • 9 / 2

Electronic International Standard Serial Number (EISSN)

  • 2167-8383

International Standard Serial Number (ISSN)

  • 2167-8375

Digital Object Identifier (DOI)

  • 10.1145/3434419

Citation Source

  • Scopus