We study a multi-player one-round game termed Stackelberg Network Pricing Game, in which a leader can set prices for a subset of m priceable edges in a graph. The other edges have a fixed cost. Based on the leader’s decision one or more followers optimize a polynomial-time solvable combinatorial minimization problem and choose a minimum cost solution satisfying their requirements based on the fixed costs and the leader’s prices. The leader receives as revenue the total amount of prices paid by the followers for priceable edges in their solutions. Our model extends several known pricing problems, including single-minded and unit-demand pricing, as well as Stackelberg pricing for certain follower problems like shortest path or minimum spanning tree. Our first main result is a tight analysis of a single-price algorithm for the single follower game, which provides a (1+ε)log m-approximation. This can be extended to provide a (1+ε)(log k+log m)-approximation for the general problem and k followers. The problem is also shown to be hard to approximate within $\mathcal{O}(\log^{\varepsilon}k + \log^{\varepsilon}m)$ for some ε>0. If followers have demands, the single-price algorithm provides an $\mathcal{O}(m^{2})$ -approximation, and the problem is hard to approximate within $\mathcal{O}(m^{\epsilon})$ for some ε>0. Our second main result is a polynomial time algorithm for revenue maximization in the special case of Stackelberg bipartite vertex-cover, which is based on non-trivial max-flow and LP-duality techniques. This approach can be extended to provide constant-factor approximations for any constant number of followers.

Abstract In Stackelberg pricing a leader sets prices for items to maximize revenue from a follower purchasing a feasible subset of items. We consider computationally bounded followers who cannot optimize exactly over the range of all feasible subsets, but who apply publicly known algorithms to determine the items to purchase. This corresponds to general multidimensional pricing when customers cannot optimize their valuation functions efficiently but still aim to act rationally to the best of their ability. We consider two versions of this novel type of pricing problem. In the MIn‐KNAPSACK variant items are weighted objects and the follower seeks to purchase a min‐cost selection of objects of some bounded weight. When he uses a greedy 2‐approximation algorithm, we provide a polynomial‐time (2+ε) ‐approximation algorithm for the leader's revenue maximization problem based on so‐called near‐uniform price assignments. We also prove the problem to be strongly NP‐hard. In the SET‐COVER variant items are subsets of some ground set which the follower seeks to cover. When he uses a standard primal‐dual approach, we prove that exact revenue maximization is possible in polynomial time when elements have frequency 2 (VERTEX‐COVER variant). This stands in sharp contrast to APX‐hardness for the problem with elements of frequency 3. © 2011 Wiley Periodicals, Inc. NETWORKS, 2012

We consider a novel type of metric task system, termed the car sharing problem, in which the operator of a car sharing program aims to serve the requests of customers occurring at different locations. Requests are modeled as a stochastic process with known parameters and a request is served if a car is located at the position of its occurrence at this time. Customers pay the service provider according to the distance they travel and similarly the service provider incurs cost proportional to the distance traveled when relocating a car from one position to another between requests.

We investigate nonparametric multiproduct pricing problems, in which we want to find revenue maximizing prices for products $\mathcal{P}$ based on a set of customer samples $\mathcal{C}$. We mostly focus on the unit-demand case, in which products constitute strict substitutes and each customer aims to purchase a single product. In this setting a customer sample consists of a number of nonzero values for different products and possibly an additional product ranking. Once prices are fixed, each customer chooses to buy one of the products she can afford based on some predefined selection rule. We distinguish between the min-buying, max-buying, and rank-buying models. Some of our results also extend to single-minded pricing, in which case products are strict complements and every customer seeks to buy a single set of products, which she purchases if the sum of prices is below her valuation for that set. For the min-buying model we show that the revenue maximization problem is not approximable within factor $\mathcal{O}(\log^{\varepsilon}|\mathcal{C}|)$ for some constant $\varepsilon>0$, unless $\mathrm{NP}\subseteq\mathrm{DTIME}(n^{\mathcal{O}(\log\log n)})$, thereby almost closing the gap between the known algorithmic results and previous lower bounds. We also prove inapproximability within $\mathcal{O}(\ell^{\varepsilon})$, $\ell$ being an upper bound on the number of nonzero values per customer, and $\mathcal{O}(|\mathcal{P}|^{\varepsilon})$ under slightly stronger assumptions and provide matching upper bounds. Surprisingly, these hardness results hold even if a price ladder constraint, i.e., a predefined order on the prices of all products, is given. Without the price ladder constraint we obtain similar hardness results for the special case of uniform valuations, i.e., the case that every customer has identical values for all the products she is interested in, assuming specific hardness of the balanced bipartite independent set problem in constant degree graphs or hardness of refuting random 3CNF formulas. Introducing a slightly more general problem definition in which customers are given as an explicit probability distribution, we obtain inapproximability within $\mathcal{O}(|\mathcal{P}|^{\varepsilon})$ assuming $\mathrm{NP}\nsubseteq\bigcap_{\delta>0}\mathrm{BPTIME}(2^{\mathcal{O}(n^{\delta})})$. These results apply to single-minded pricing as well. For the max-buying model a polynomial-time approximation scheme exists if a price ladder is given. We give a matching lower bound by proving strong NP-hardness. Assuming limited product supply, we analyze a generic local search algorithm and prove that it is 2-approximate. Finally, we discuss implications for the rank-buying model.

This paper deals with the design of efficiently computable incentive-compatible mechanisms for combinatorial optimization problems with single-minded agents each possibly having multiple private parameters. We focus on approximation algorithms for NP-hard mechanism design problems. These algorithms need to satisfy certain monotonicity properties to ensure truthfulness. Since most of the known approximation techniques do not fulfill these properties, we study alternative techniques. Our first contribution is a quite general method to transform a pseudopolynomial algorithm into a monotone fully polynomial time approximation scheme (FPTAS). This can be applied to various problems like, e.g., knapsack, constrained shortest path, or job scheduling with deadlines. For example, the monotone FPTAS for the knapsack problem gives a very efficient, truthful mechanism for single-minded multiunit auctions. The best previous result for such auctions was a 2-appro-xi-ma-tion. In addition, we present a monotone PTAS for the generalized assignment problem with any constant number of private parameters per agent. The most efficient way to solve packing integer programs (PIPs) is linear programming–based randomized rounding, which also is in general not monotone. We show that primal-dual greedy algorithms achieve almost the same approximation ratios for PIPs as randomized rounding. The advantage is that these algorithms are inherently monotone. This way, we can significantly improve the approximation ratios of truthful mechanisms for various fundamental mechanism design problems like single-minded combinatorial auctions (CAs), unsplittable flow routing, and multicast routing. Our primal-dual approximation algorithms can also be used for the winner determination in CAs with general bidders specifying their bids through an oracle.

Randomized mechanisms, which map a set of bids to a probability distribution over outcomes rather than a single outcome, are an important but ill-understood area of computational mechanism design. We investigate the role of randomized outcomes (henceforth, “lotteries”) in the context of a fundamental and archetypical multi-parameter mechanism design problem: selling heterogeneous items to unit-demand bidders. To what extent can a seller improve her revenue by pricing lotteries rather than items, and does this modification of the problem affect its computational tractability? Our results show that the answers to these questions hinge on whether consumers can purchase only one lottery (the buy-one model) or purchase any set of lotteries and receive an independent sample from each (the buy-many model). In the buy-one model, there is a polynomial-time algorithm to compute the revenue-maximizing envy-free prices (thus overcoming the inapproximability of the corresponding item pricing problem) and the revenue of the optimal lottery system can exceed the revenue of the optimal item pricing by an unbounded factor as long as the number of item types is at least 4. In the buy-many model with n item types, the profit achieved by lottery pricing can exceed item pricing by a factor of Θ(log n) but not more, and optimal lottery pricing cannot be approximated within a factor of (nε) for some ε > 0, unless NP ⊆ ∩δ>0 BPTIME . Our lower bounds rely on a mixture of geometric and algebraic techniques, whereas the upper bounds use a novel rounding scheme to transform a mechanism with randomized outcomes into one with deterministic outcomes while losing only a bounded amount of revenue.

This paper deals with the design of efficiently computable incentive compatible, or truthful, mechanisms for combinatorial optimization problems with multi-parameter agents. We focus on approximation algorithms for NP-hard mechanism design problems. These algorithms need to satisfy certain monotonicity properties to ensure truthfulness. Since most of the known approximation techniques do not fulfill these properties, we study alternative techniques.Our first contribution is a quite general method to transform a pseudopolynomial algorithm into a monotone FPTAS. This can be applied to various problems like, e.g., knapsack, constrained shortest path, or job scheduling with deadlines. For example, the monotone FPTAS for the knapsack problem gives a very efficient, truthful mechanism for single-minded multi-unit auctions. The best previous result for such auctions was a 2-approximation. In addition, we present a monotone PTAS for the generalized assignment problem with any bounded number of parameters per agent.The most efficient way to solve packing integer programs (PIPs) is LP-based randomized rounding, which also is in general not monotone. We show that primal-dual greedy algorithms achieve almost the same approximation ratios for PIPs as randomized rounding. The advantage is that these algorithms are inherently monotone. This way, we can significantly improve the approximation ratios of truthful mechanisms for various fundamental mechanism design problems like single-minded combinatorial auctions (CAs), unsplittable flow routing and multicast routing. Our approximation algorithms can also be used for the winner determination in CAs with general bidders specifying their bids through an oracle.