On envy-free pareto efficient pricing

• Authors: Xia Hua
• Venue: FAW-AAIM'12 Proceedings of the 6th international Frontiers in Algorithmics, and Proceedings of the 8th international conference on Algorithmic Aspects in Information and Management
• Year: 2012

In a centralized combinatorial market, the market maker has a number of items for sale to potential consumers, who wish to purchase their preferred items. Different solution concepts (allocations of items to players) capture different perspectives in the market. Our focus is to balance three properties: revenue maximization from the market maker's perspective, fairness from consumers' perspective, and efficiency from the market's global perspective. Most well-known solution concepts capture only one or two properties, e.g., Walrasian equilibrium requires fairness for consumers and uses market clearance to guarantee efficiency but ignores revenue for the market maker. Revenue maximizing envy-free pricing balances market maker's revenue and consumer's fairness, but ignores efficiency. In this paper, we study a solution concept, envy-free Pareto efficient pricing, that lies between Walrasian equilibrium and envy-free pricing. It requires fairness for consumers and balances efficiency and revenue. We study envy-free Pareto efficient pricing in two domains, unit-demand and single-minded consumers, and analyze its existence, computation, and economic properties.