On Allocations with Negative Externalities

  • Sayan Bhattacharya
  • Janardhan Kulkarni
  • Kamesh Munagala
  • Xiaoming Xu
Part of the Lecture Notes in Computer Science book series (LNCS, volume 7090)


We consider the problem of a monopolist seller who wants to sell some items to a set of buyers. The buyers are strategic, unit-demand, and connected by a social network. Furthermore, the utility of a buyer is a decreasing function of the number of neighbors who do not own the item. In other words, they exhibit negative externalities, deriving utility from being unique in their purchases. In this model, any fixed setting of the price induces a sub-game on the buyers. We show that it is an exact potential game which admits multiple pure Nash Equilibria. A natural problem is to compute those pure Nash equilibria that raise the most and least revenue for the seller. These correspond respectively to the most optimistic and most pessimistic revenues that can be raised.

We show that the revenues of both the best and worst equilibria are hard to approximate within sub-polynomial factors. Given this hardness, we consider a relaxed notion of pricing, where the price for the same item can vary within a constant factor for different buyers. We show a 4-approximation to the pessimistic revenue when the prices are relaxed by a factor of 4. The interesting aspect of this algorithm is that it uses a linear programming relaxation that only encodes part of the strategic behavior of the buyers in its constraints, and rounds this relaxation to obtain a starting configuration for performing relaxed Nash dynamics. Finally, for the maximum revenue Nash equilibrium, we show a 2-approximation for bipartite graphs (without price relaxation), and complement this result by showing that the problem is NP-Hard even on trees.


Nash Equilibrium Bipartite Graph Negative Externality Potential Game White Node 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  • Sayan Bhattacharya
    • 1
  • Janardhan Kulkarni
    • 1
  • Kamesh Munagala
    • 1
  • Xiaoming Xu
    • 1
  1. 1.Department of Computer ScienceDuke UniversityDurhamUSA

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