New mechanism for repeated posted price auction with a strategic buyer without discounting
Nikita Kalinin

TL;DR
This paper proposes an optimal incentive-compatible strategy for a seller in a repeated posted price auction with a single strategic buyer, addressing asymmetric information without discounting, and establishes its theoretical optimality.
Contribution
It introduces a novel seller's strategy for repeated posted price auctions with a strategic buyer, achieving the lowest possible surplus distortion under asymmetric information.
Findings
The strategy is incentive-compatible and optimal in the top type lower bound.
It balances rewarding, adaptation, and type confirmation prices.
The approach addresses monopoly-monopsony dynamics without discounting.
Abstract
On ad exchange platforms the place for advertisement is sold through different kinds of auctions. However, it is not uncommon the situation where the seller repeatedly encounters only one buyer, thus the posted price auction degenerates into a monopoly-monopsony game with asymmetric information and nearly an infinite number of rounds; on each round the seller proposes the price and the buyer accepts or rejects it. I learned this problem from a discussion with members of Yandex research team and my main motivation was to find an incentive-compatible seller's strategy. In this short paper such a strategy is proposed and a corresponding distortion at the top type lower bound (Spence-Mirrlees property, actually) for the surplus of the buyer is established; this shows that the proposed strategy is the best possible. The key ingredients are the following. The main leash that the buyer has…
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Taxonomy
TopicsAuction Theory and Applications · Consumer Market Behavior and Pricing · Game Theory and Applications
