Abstract
We analyze the canonical nonlinear pricing model with limited information. A seller offers a menu with a finite number of choices to a continuum of buyers with a continuum of possible valuations. By revealing an underlying connection to quantization theory, we derive the optimal finite menu for the socially efficient and the revenue-maximizing mechanism. In both cases, we provide an estimate of the loss resulting from the usage of a finite n-class menu. We show that the losses converge to zero at a rate proportional to 1/n 2 as n becomes large.
The first author acknowledges financial support through NSF Grant SES 0851200.
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© 2012 ICST Institute for Computer Science, Social Informatics and Telecommunications Engineering
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Bergemann, D., Shen, J., Xu, Y., Yeh, E.M. (2012). Mechanism Design with Limited Information: The Case of Nonlinear Pricing. In: Jain, R., Kannan, R. (eds) Game Theory for Networks. GameNets 2011. Lecture Notes of the Institute for Computer Sciences, Social Informatics and Telecommunications Engineering, vol 75. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-30373-9_1
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DOI: https://doi.org/10.1007/978-3-642-30373-9_1
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-30372-2
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