Selling two goods optimally

Journal article

We provide sufficient conditions for revenue maximization in a two-good monopoly where the buyer's values for the items come from independent (but not necessarily identical) distributions over bounded intervals. Under certain distributional assumptions, we give exact, closed-form formulas for the prices and allocation rule of the optimal selling mechanism. As a side result we give the first example of an optimal mechanism in an i.i.d. setting over a support of the form which is not deterministic. Since our framework is based on duality techniques, we were also able to demonstrate how slightly relaxed versions of it can still be used to design mechanisms that have very good approximation ratios with respect to the optimal revenue, through a “convexification” process.

Authors: Giannakopoulos, Y; Koutsoupias, E

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: Elsevier
• Journal: Information and Computation
• Volume: 261
• Issue: 2
• Pages: 432-445
• Publication date: 2018-02-10
• Acceptance date: 2016-09-13
• DOI: 10.1016/j.ic.2018.02.016
• EISSN: 1090-2651
• ISSN: 0890-5401
• Language: English
• Keywords: mechanism design; optimal auctions; revenue maximization; duality