Maximal Revenue with Multiple Goods: Nonmonotonicity and Other Observations

Authors: 
Sergiu Hart
Philip J. Reny
Abstract: 

Consider the problem of maximizing the revenue from selling a number of goods to a single buyer. We show that, unlike the case of one good, when the buyer's values for the goods increase the seller's maximal revenue may well decrease. We also provide a characterization of revenue-maximizing mechanisms (more generally, of "seller-favorable" mechanisms) that circumvents nondifferentiability issues. Finally, through simple and transparent examples, we clarify the need for and the use of randomization when maximizing revenue in the multiple-goods versus the one-good case.

Date: 
November, 2012
Published in: 
Thoretical economics
Number: 
630