Simple and Approximately Optimal Pricing for Proportional Complementarities

TL;DR

This paper introduces a simple pricing mechanism for buyers with proportional complementarities, achieving near-optimal revenue guarantees and extending to complex hypergraphic valuation models.

Contribution

It proposes a new class of mechanisms combining free items and inflated prices, providing approximation guarantees for proportional and hypergraphic valuation models.

Findings

A 12-approximation for pairwise proportional complementarities.

An $O( ext{min}\{d,k\})$-approximation for hypergraphic valuations.

Mechanisms outperform fully separate selling in presence of complementarities.

Abstract

We study a new model of complementary valuations, which we call "proportional complementarities." In contrast to common models, such as hypergraphic valuations, in our model, we do not assume that the extra value derived from owning a set of items is independent of the buyer's base valuations for the items. Instead, we model the complementarities as proportional to the buyer's base valuations, and these proportionalities are known market parameters. Our goal is to design a simple pricing scheme that, for a single buyer with proportional complementarities, yields approximately optimal revenue. We define a new class of mechanisms where some number of items are given away for free, and the remaining items are sold separately at inflated prices. We find that the better of such a mechanism and selling the grand bundle earns a 12-approximation to the optimal revenue for pairwise proportional complementarities. This confirms the intuition that items should not be sold completely separately in the presence of complementarities. In the more general case, a buyer has a maximum of proportional positive hypergraphic valuations, where a hyperedge in a given hypergraph describes the boost to the buyer's value for item $i$ given by owning any set of items $T$ in addition. The maximum-out-degree of such a hypergraph is $d$, and $k$ is the positive rank of the hypergraph. For valuations given by these parameters, our simple pricing scheme is an $O(\min\{d,k\})$-approximation.