Posted Price Mechanisms for a Random Stream of Customers

José R. Correa, Patricio Foncea, Ruben Hoeksma, Tim Oosterwijk, Tjark Vredeveld

Research output: Chapter in Book/Report/Conference proceedingConference article in proceedingAcademicpeer-review

Abstract

Posted price mechanisms constitute a widely used way of selling items to strategic consumers. Although suboptimal, the attractiveness of these mechanisms comes from their simplicity and easy implementation. In this paper, we investigate the performance of posted price mechanisms when customers arrive in an unknown random order. We compare the expected revenue of these mechanisms to the expected revenue of the optimal auction in two different settings. Namely, the nonadaptive setting in which all offers are sent to the customers beforehand, and the adaptive setting in which an offer is made when a consumer arrives. For the nonadaptive case, we obtain a strategy achieving an expected revenue within at least a 1-1/e fraction of that of the optimal auction. We also show that this bound is tight, even if the customers have i.i.d. valuations for the item. For the adaptive case, we exhibit a posted price mechanism that achieves a factor 0.745 of the optimal revenue, when the customers have i.i.d. valuations for the item. Furthermore, we prove that our results extend to the prophet inequality setting and in particular our result for i.i.d. random valuations resolves a problem posed by Hill and Kertz.
Original languageEnglish
Title of host publicationEC '17 Proceedings of the 2017 ACM Conference on Economics and Computation
PublisherACM New York
Pages169-186
ISBN (Print)978-1-4503-4527-9
DOIs
Publication statusPublished - 2017

Cite this

Correa, J. R., Foncea, P., Hoeksma, R., Oosterwijk, T., & Vredeveld, T. (2017). Posted Price Mechanisms for a Random Stream of Customers. In EC '17 Proceedings of the 2017 ACM Conference on Economics and Computation (pp. 169-186). ACM New York. https://doi.org/10.1145/3033274.3085137