A Simple and Approximately Optimal Mechanism for a Buyer with Complements

Abstract

We consider a revenue-maximizing seller with m heterogeneous items and a single buyer whose valuation v for the items may exhibit both substitutes (i.e., for some S, T , v(S ∪ T ) < v(S) + v(T )) and complements (i.e., for some S, T , v(S ∪ T ) > v(S) + v(T )). We show that the mechanism first proposed by Babaioff et al. [2014] -the better of selling the items separately and bundling them together -guarantees a Θ(d) fraction of the optimal revenue, where d is a measure on the degree of complementarity. Note that this is the first approximately optimal mechanism for a buyer whose valuation exhibits any kind of complementarity, and extends the work of Rubinstein and Weinberg [2015], which proved that the same simple mechanisms achieve a constant factor approximation when buyer valuations are subadditive, the most general class of complement-free valuations.Our proof is enabled by the recent duality framework developed in Cai et al. [2016], which we use to obtain a bound on the optimal revenue in this setting. Our main technical contributions are specialized to handle the intricacies of settings with complements, and include an algorithm for partitioning edges in a hypergraph. Even nailing down the right model and notion of "degree of complementarity" to obtain meaningful results is of interest, as the natural extensions of previous definitions provably fail.

On the Competition Complexity of Dynamic Mechanism Design

“…It was recently extended by Cai and Zhao [12] to prove approximation results for simple mechanisms in settings with multiple subadditive bidders, and by Brustle et al [9] for a two-sided market setting. It was also extended in a different way by Eden et al [28] for a single buyer with values that exhibit a "limited complementarity" property.…”