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Pricing Social Goods

Authors Alon Eden, Tomer Ezra, Michal Feldman

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Alon Eden
Tomer Ezra
Michal Feldman

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Alon Eden, Tomer Ezra, and Michal Feldman. Pricing Social Goods. In 25th Annual European Symposium on Algorithms (ESA 2017). Leibniz International Proceedings in Informatics (LIPIcs), Volume 87, pp. 35:1-35:14, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2017) https://doi.org/10.4230/LIPIcs.ESA.2017.35

Abstract

Social goods are goods that grant value not only to their owners but also to the owners' surroundings, be it their families, friends or office mates. The benefit a non-owner derives from the good is affected by many factors, including the type of the good, its availability, and the social status of the non-owner. Depending on the magnitude of the benefit and on the price of the good, a potential buyer might stay away from purchasing the good, hoping to free ride on others' purchases. A revenue-maximizing seller who sells social goods must take these considerations into account when setting prices for the good. The literature on optimal pricing has advanced considerably over the last decade, but little is known about optimal pricing schemes for selling social goods. In this paper, we conduct a systematic study of revenue-maximizing pricing schemes for social goods: we introduce a Bayesian model for this scenario, and devise nearly-optimal pricing schemes for various types of externalities, both for simultaneous sales and for sequential sales.

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Keywords
  • Public Goods
  • Posted Prices
  • Revenue Maximization
  • Externalities

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