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Maximal Revenue with Multiple Goods: Nonmonotonicity and Other Observations

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  • Sergiu Hart
  • Philip J. Reny

Abstract

Consider the problem of maximizing the revenue from selling a number of goods to a single buyer. We show that, unlike the case of one good, when the buyer's values for the goods increase the seller's maximal revenue may well decrease. We also provide a characterization of revenue-maximizing mechanisms (more generally, of "seller-favorable" mechanisms) that circumvents nondifferentiability issues. Finally, through simple and transparent examples, we clarify the need for and the use of randomization when maximizing revenue in the multiple-goods versus the one-good case.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 786969000000000625.

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Date of creation: 15 Dec 2012
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Handle: RePEc:cla:levarc:786969000000000625

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  1. Gregory Pavlov, 2010. "Optimal Mechanism for Selling Two Goods," UWO Department of Economics Working Papers 20103, University of Western Ontario, Department of Economics.
  2. Manelli, Alejandro M. & Vincent, Daniel R., 2006. "Bundling as an optimal selling mechanism for a multiple-good monopolist," Journal of Economic Theory, Elsevier, vol. 127(1), pages 1-35, March.
  3. Sergiu Hart & Noam Nisan, 2012. "Approximate Revenue Maximization with Multiple Items," Discussion Paper Series dp606, The Center for the Study of Rationality, Hebrew University, Jerusalem.
  4. Manelli, Alejandro M. & Vincent, Daniel R., 2007. "Multidimensional mechanism design: Revenue maximization and the multiple-good monopoly," Journal of Economic Theory, Elsevier, vol. 137(1), pages 153-185, November.
  5. Thanassoulis, John, 2004. "Haggling over substitutes," Journal of Economic Theory, Elsevier, vol. 117(2), pages 217-245, August.
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