Bayesian optimal knapsack procurement
AbstractA budget-constrained buyer wants to purchase items from a shortlisted set. Items are differentiated by observable quality and sellers have private reserve prices for their items. The buyer’s problem is to select a subset of maximal quality. Money does not enter the buyer’s objective function, but only his constraints. Sellers quote prices strategically, inducing a knapsack game. We report the Bayesian optimal mechanism for the buyer’s problem. We find that simultaneous take-it-or-leave-it offers are interim optimal.
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Bibliographic InfoArticle provided by Elsevier in its journal European Journal of Operational Research.
Volume (Year): 234 (2014)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/eor
Game theory; Mechanism design; Knapsack problem; Subsidies; Budget; Procurement;
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