Fixed price

About: Fixed price is a research topic. Over the lifetime, 1180 publications have been published within this topic receiving 26759 citations.

Mechanism Design via Differential Privacy

Abstract: We study the role that privacy-preserving algorithms, which prevent the leakage of specific information about participants, can play in the design of mechanisms for strategic agents, which must encourage players to honestly report information. Specifically, we show that the recent notion of differential privacv, in addition to its own intrinsic virtue, can ensure that participants have limited effect on the outcome of the mechanism, and as a consequence have limited incentive to lie. More precisely, mechanisms with differential privacy are approximate dominant strategy under arbitrary player utility functions, are automatically resilient to coalitions, and easily allow repeatability. We study several special cases of the unlimited supply auction problem, providing new results for digital goods auctions, attribute auctions, and auctions with arbitrary structural constraints on the prices. As an important prelude to developing a privacy-preserving auction mechanism, we introduce and study a generalization of previous privacy work that accommodates the high sensitivity of the auction setting, where a single participant may dramatically alter the optimal fixed price, and a slight change in the offered price may take the revenue from optimal to zero.

Optimal dynamic pricing of inventories with stochastic demand over finite horizons

Abstract: In many industries, managers face the problem of selling a given stock of items by a deadline We investigate the problem of dynamically pricing such inventories when demand is price sensitive and stochastic and the firm's objective is to maximize expected revenues Examples that fit this framework include retailers selling fashion and seasonal goods and the travel and leisure industry, which markets space such as seats on airline flights, cabins on vacation cruises, and rooms in hotels that become worthless if not sold by a specific time We formulate this problem using intensity control and obtain structural monotonicity results for the optimal intensity resp, price as a function of the stock level and the length of the horizon For a particular exponential family of demand functions, we find the optimal pricing policy in closed form For general demand functions, we find an upper bound on the expected revenue based on analyzing the deterministic version of the problem and use this bound to prove that simple, fixed price policies are asymptotically optimal as the volume of expected sales tends to infinity Finally, we extend our results to the case where demand is compound Poisson; only a finite number of prices is allowed; the demand rate is time varying; holding costs are incurred and cash flows are discounted; the initial stock is a decision variable; and reordering, overbooking, and random cancellations are allowed

Bundling Information Goods: Pricing, Profits, and Efficiency

Abstract: We study the strategy of bundling a large number of information goods, such as those increasingly available on the Internet, and selling them for a fixed price. We analyze the optimal bundling strategies for a multiproduct monopolist, and we find that bundling very large numbers of unrelated information goods can be surprisingly profitable. The reason is that the law of large numbers makes it much easier to predict consumers' valuations for a bundle of goods than their valuations for the individual goods when sold separately. As a result, this "predictive value of bundling" makes it possible to achieve greater sales, greater economic efficiency, and greater profits per good from a bundle of information goods than can be attained when the same goods are sold separately. Our main results do not extend to most physical goods, as the marginal costs of production for goods not used by the buyer typically negate any benefits from the predictive value of large-scale bundling. While determining optimal bundling strategies for more than two goods is a notoriously difficult problem, we use statistical techniques to provide strong asymptotic results and bounds on profits for bundles of any arbitrary size. We show how our model can be used to analyze the bundling of complements and substitutes, bundling in the presence of budget constraints, and bundling of goods with various types of correlations and how each of these conditions can lead to limits on optimal bundle size. In particular we find that when different market segments of consumers differ systematically in their valuations for goods, simple bundling will no longer be optimal. However, by offering a menu of different bundles aimed at each market segment, bundling makes traditional price discrimination strategies more powerful by reducing the role of unpredictable idiosyncratic components of valuations. The predictions of our analysis appear to be consistent with empirical observations of the markets for Internet and online content, cable television programming, and copyrighted music.

Wage Determination and Efficiency in Search Equilibrium

Abstract: The concept of a competitive market is a major tool in the analysis of economists. In the simplest version of a market, resource allocation responds instantly to changes in parameters, leaving no room for frictional unemployment. One response to the unreality of this implication has been to introduce spatially distinct markets, with unemployment as workers move between markets. As modeled by Lucas and Prescott (1974), workers who are not moving are not unemployed. An alternative response is contained in the sizeable fixed price equilibrium literature, where it is assumed that prices do not change to clear markets in the short run. In contrast, the conceptual starting place of this analysis is to drop the idea of a market. Rather than markets being the mechanism by which workers and jobs are brought together, it is assumed that there is a search process which stochastically brings together unemployed workers and vacant jobs pairwise. It is taken as axiomatic that the process takes time and so involves foregone output. It is assumed that a worker and a job brought together by the search process negotiate a wage, with instantaneous negotiation. Thus, the only frictions in the model are in the search process, with wages flexible. Actual search and negotiation processes are complicated and would be difficult to model in detail. Here we make numerous simplifying assumptions to permit explicit solution of equilibrium variables and easy analysis of their efficiency properties. The focus of the analysis is the efficiency of the incentive to enter the labour market. That is, we compare the lifetime expected present discounted value of earnings of a new worker with the social marginal product of that worker. The comparison depends critically on the bargaining solution and on the nature of the search technology. Generally, equilibrium is not efficient because of search externalities. The sources of the externalities are easy to see. The presence of an additional worker makes it easier for vacancies to find workers and harder for other workers to find jobs. The wage negotiation, however, reflects the relative bargaining powers of workers and jobs. Only in special cases will the balance of bargaining powers result in a wage which reflects the balance of search externalities as well as the value of output directly produced. The analysis identifies cases where the incentive for entry is too large or too small. This efficiency analysis complements other efficiency analyses of search intensity, job-quitting, and job-taking (Diamond (1981), Diamond and Maskin (1979, 1981), and Mortensen (1979, 1981)). These latter papers have considered markets with equal numbers of jobs and workers. This paper focuses on the implications of unequal numbers

Accounting and fixed price multipliers in a social accounting matrix framework

Abstract: The relationship between output, factor demands, and income and the decomposition of these relationships into separate effects as suggested by the structure of a social accounting matrix are examined. The best analytical approach for examining these relationships uses a model that starts with a social accounting matrix, and hence, with a structure of an economy at some base date. The methodology contains accounting multipliers that give insight into the anatomy of the social accounting matrix. In addition, the multipliers examine transfer effects and the full circular and cross effects between different parts of the economy. The model shows how the structure of production and income distribution are interrelated and how they derive from the structure of exogenous demand and the distribution of assets. Analysis of the social accounting matrix and the accounting multipliers shows the extent to which initial structure is important in determining the impact of changes in demand. The fixed price multiplier approach could be extended to embrace the interaction of price changes and shifts in exogenuous demand. Equations and matrix values are provided. 17 references.