Fixed-price Diffusion Mechanism Design
This addresses revenue optimization for sellers in networked markets, representing a novel approach in mechanism design.
The paper tackles the problem of a seller maximizing revenue in a social network where only neighbors can be directly contacted, by proposing a fixed-price mechanism that incentivizes information diffusion to all potential buyers without requiring valuation revelation. The result is a computationally efficient mechanism that guarantees at least half of the optimal revenue.
We consider a fixed-price mechanism design setting where a seller sells one item via a social network, but the seller can only directly communicate with her neighbours initially. Each other node in the network is a potential buyer with a valuation derived from a common distribution. With a standard fixed-price mechanism, the seller can only sell the item among her neighbours. To improve her revenue, she needs more buyers to join in the sale. To achieve this, we propose the very first fixed-price mechanism to incentivize the seller's neighbours to inform their neighbours about the sale and to eventually inform all buyers in the network to improve seller's revenue. Compared with the existing mechanisms for the same purpose, our mechanism does not require the buyers to reveal their valuations and it is computationally easy. More importantly, it guarantees that the improved revenue is at least 1/2 of the optimal.