Research Article
Mechanism Design with Limited Information: The Case of Nonlinear Pricing
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@INPROCEEDINGS{10.1007/978-3-642-30373-9_1, author={Dirk Bergemann and Ji Shen and Yun Xu and Edmund Yeh}, title={Mechanism Design with Limited Information: The Case of Nonlinear Pricing}, proceedings={Game Theory for Networks. 2nd International ICST Conference, GAMENETS 2011, Shanghai, China, April 16-18, 2011, Revised Selected Papers}, proceedings_a={GAMENETS}, year={2012}, month={10}, keywords={Mechanism Design Limited Information Nonlinear Pricing Quantization Lloyd-Max Optimality}, doi={10.1007/978-3-642-30373-9_1} }- Dirk Bergemann
Ji Shen
Yun Xu
Edmund Yeh
Year: 2012
Mechanism Design with Limited Information: The Case of Nonlinear Pricing
GAMENETS
Springer
DOI: 10.1007/978-3-642-30373-9_1
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 -class menu. We show that the losses converge to zero at a rate proportional to 1/ as becomes large.
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