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Revenue maximization in the dynamic knapsack problem

Dizdar, D, Gershkov, A and Moldovanu, B (2011) Revenue maximization in the dynamic knapsack problem Theoretical Economics, 6 (2). pp. 157-184.

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We analyze maximization of revenue in the dynamic and stochastic knapsack problem where a given capacity needs to be allocated by a given deadline to sequentially arriving agents. Each agent is described by a two-dimensional type that reflects his capacity requirement and his willingness to pay per unit of capacity. Types are private information. We first characterize implementable policies. Then we solve the revenue maximization problem for the special case where there is private information about per-unit values, but capacity needs are observable. After that we derive two sets of additional conditions on the joint distribution of values and weights under which the revenue maximizing policy for the case with observable weights is implementable, and thus optimal also for the case with two-dimensional private information. In particular, we investigate the role of concave continuation revenues for implementation. We also construct a simple policy for which per-unit prices vary with requested weight but not with time, and we prove that it is asymptotically revenue maximizing when available capacity and time to the deadline both go to infinity. This highlights the importance of nonlinear as opposed to dynamic pricing. © 2011 Deniz Dizdar, Alex Gershkov, and Benny Moldovanu.

Item Type: Article
Divisions : Surrey research (other units)
Authors :
Dizdar, D
Moldovanu, B
Date : 1 May 2011
DOI : 10.3982/TE700
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:13
Last Modified : 24 Jan 2020 14:08

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