Dynamic Mechanism Design for Online Commerce

This paper is a mechanism design study for a monopolist selling multiple identical items to potential buyers arriving over time. Participants in our model are time sensitive, with the same discount factor; potential buyers have unit demand and arrive sequentially according to a renewal process; and...

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Veröffentlicht in:Operations research Jg. 54; H. 2; S. 291 - 310
1. Verfasser: Gallien, Jeremie
Format: Journal Article
Sprache:Englisch
Veröffentlicht: Linthicum, MD INFORMS 01.03.2006
Institute for Operations Research and the Management Sciences
Schlagworte:
Analysis
applications
Applied sciences
asset selling
Auctions
bidding/auctions
Budget allocation
Commerce
Consumer spending
Design optimization
Discounting
dynamic pricing
Dynamic programming
dynamic programming/optimal control
Exact sciences and technology
Forecasts and trends
games/group decisions
Interest rates
lectronic commerce
marketing
Marketing research
Mathematical functions
Mathematical theorems
Mechanism design
Monopolistic competition
online auctions
Operational research and scientific management
Operational research. Management science
optimal stopping
Portfolio theory
pricing
Pricing policies
Revenue
Studies
Utility functions
United States
Discount
Interest rate
Renewal process
Numerical method
games/group decisions
optimal stopping; marketing
Marketing
Mechanism synthesis
Sales
online auctions
bidding/auctions: mechanism design; dynamic programming/optimal control
Pricing
Electronic trade
Infinite horizon
Dynamic programming
Bidding
Multiple item
Optimal stopping
Game theory
Selling price
Social decision
Optimal control
applications: asset selling
pricing: dynamic pricing
Tariffication
ISSN:0030-364X, 1526-5463
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Beschreibung
Zusammenfassung:This paper is a mechanism design study for a monopolist selling multiple identical items to potential buyers arriving over time. Participants in our model are time sensitive, with the same discount factor; potential buyers have unit demand and arrive sequentially according to a renewal process; and valuations are drawn independently from the same regular distribution. Invoking the revelation principle, we restrict our attention to direct dynamic mechanisms taking a sequence of valuations and arrival epochs as input. We define two properties (discreteness and stability), and prove under further distributional assumptions that we may at no cost of generality consider only mechanisms satisfying them. This effectively reduces the mechanism input to a sequence of valuations and leads to formulate the problem as a dynamic program (DP). As this DP is equivalent to a well-known infinite-horizon asset-selling problem, we finally characterize the optimal mechanism as a sequence of posted prices increasing with each sale. Remarkably, this result rationalizes somewhat the frequent restriction to dynamic pricing policies and impatient buyers assumption. Our numerical study indicates that, under various valuation distributions, the benefit of dynamic pricing over a fixed posted price may be small. Besides, posted prices are preferable to online auctions for a large number of items or high interest rate, but in other cases auctions are close to optimal and significantly more robust.
Bibliographie:SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 14
ISSN:0030-364X
1526-5463
DOI:10.1287/opre.1050.0239