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Setting Equilibrium Prices, Approximately BRENDAN LUCIER Microsoft Research New England We outline recent results, positive and negative, on pricing indivisible goods to approximately maximize social welfare. We describe a relaxation of standard pricing problems in which a seller can bundle goods together prior to sale. Categories and Subject Descriptors: J.4 [Computer Applications]: Social and Behavioral Sciences--Economics General Terms: Algorithms, Economics, Theory Additional Key Words and Phrases: Combinatorial auctions; Walrasian equilibrium; Envy-free Consider the plight of a retail clothing store owner who must decide how best to sell his wares. The owner takes pride in his store, and wants above all else to distribute his inventory to maximize the welfare of his customers. In principle, the owner could consult with each customer about his or her fashion needs, then ultimately propose a wardrobe and price to each one. While such a business model might be feasible for a super-elite fashion outlet, a more practical (and common) approach is to post prices on individual items and let the customers choose what to purchase at the specified prices. The seller's problem then becomes one of selecting appropriate prices. In this letter we discuss this classic equilibrium pricing problem, using the clothing
ACM SIGecom Exchanges – Association for Computing Machinery
Published: Jun 1, 2013
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