Bundle pricing with comparable items

  • Authors:

  • Alexander Grigoriev;Joyce Van Loon;Maxim Sviridenko;Marc Uetz;Tjark Vredeveld

  • Affiliations:

  • Maastricht University, Quantitative Economics, Maastricht, The Netherlands;Maastricht University, Quantitative Economics, Maastricht, The Netherlands;IBM T.J. Watson Research Center, Yorktown Heigths, NY;Maastricht University, Quantitative Economics, Maastricht, The Netherlands;Maastricht University, Quantitative Economics, Maastricht, The Netherlands

  • Venue:
  • ESA'07 Proceedings of the 15th annual European conference on Algorithms
  • Year:
  • 2007

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Abstract

We consider a revenue maximization problem where we are selling a set of items, each available in a certain quantity, to a set of bidders. Each bidder is interested in one or several bundles of items. We assume the bidders' valuations for each of these bundles to be known. Whenever bundle prices are determined by the sum of single item prices, this algorithmic problem was recently shown to be inapproximable to within a semi-logarithmic factor. We consider two scenarios for determining bundle prices that allow to break this inapproximability barrier. Both scenarios are motivated by problems where items are different, yet comparable. First, we consider classical single item prices with an additional monotonicity constraint, enforcing that larger bundles are at least as expensive as smaller ones. We show that the problem remains strongly NP-hard, and we derive a PTAS. Second, motivated by real-life cases, we introduce the notion of affine price functions, and derive fixed-parameter polynomial time algorithms.