Optimal bundle pricing with monotonicity constraint

We consider the problem to sell items to a set of bidders. Bidders bid on bundles of items, and each item's availability is unbounded, like for digital goods. We need to determine item prices so as to maximize the total revenue collected from the bidders. The problem is inapproximable to within a logarithmic factor. We suggest a natural monotonicity constraint, enforcing that larger bundles are at least as expensive as smaller ones. We show that this problem remains strongly NP-hard, and we derive a PTAS. We also discuss a special case known as the highway pricing problem. Key words: Algorithm design, computational complexity, approximation algorithms, bundle pricing, revenue optimization

• Type: Journal
• Year: 2008
• Where: ORL
• Authors: Alexander Grigoriev, Joyce van Loon, Maxim Sviridenko, Marc Uetz, Tjark Vredeveld
• Keywords: Logarithmic Factor, Natural Monotonicity Constraint, ORL 2008, Total Revenue