A Two-Step Approach to Optimal Dynamic Pricing in Multi-Demand Combinatorial Markets

TL;DR

This paper extends the understanding of dynamic pricing strategies in online markets with multiple buyers, demonstrating how to maximize social welfare through price updates in more complex buyer scenarios.

Contribution

It generalizes previous results by showing dynamic pricing can maximize social welfare with up to four buyers and buyers willing to purchase up to three items, broadening applicability.

Findings

Dynamic pricing can be extended from three to four buyers.

Maximizing social welfare is possible with buyers willing to buy up to three items.

Effective pricing strategies depend on the number of welfare-maximizing allocations.

Abstract

Online markets are a part of everyday life, and their rules are governed by algorithms. Assuming participants are inherently self-interested, well designed rules can help to increase social welfare. Many algorithms for online markets are based on prices: the seller is responsible for posting prices while buyers make purchases which are most profitable given the posted prices. To make adjustments to the market the seller is allowed to update prices at certain timepoints. Posted prices are an intuitive way to design a market. Despite the fact that each buyer acts selfishly, the seller's goal is often assumed to be that of social welfare maximization. Berger, Eden and Feldman recently considered the case of a market with only three buyers where each buyer has a fixed number of goods to buy and the profit of a bought bundle of items is the sum of profits of the items in the bundle. For such markets, Berger et. al. showed that the seller can maximize social welfare by dynamically updating posted prices before arrival of each buyer. B\'{e}rczi, B\'{e}rczi-Kov\'{a}cs and Sz\"{o}gi showed that the social welfare can be maximized also when each buyer is ready to buy at most two items. We study the power of posted prices with dynamical updates in more general cases. First, we show that the result of Berger et. al. can be generalized from three to four buyers. Then we show that the result of B\'{e}rczi, B\'{e}rczi-Kov\'{a}cs and Sz\"{o}gi can be generalized to the case when each buyer is ready to buy up to three items. We also show that a dynamic pricing is possible whenever there are at most two allocations maximizing social welfare.