Fall 2016

Simple Pricing Schemes for Consumers with Evolving Values

Thursday, September 22nd, 2016 10:00 am10:30 am

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Calvin Lab Auditorium 

A typical mechanism design problem involves uncertainty in the designer's knowledge of the preferences of the participants: in revenue maximization settings, the seller typically pays an "informational rent" owing to this uncertainty. We study settings where the buyer also faces uncertainty in his own value: the buyer repeatedly uses the product and does not know ahead of time what his value for a future use would be. In fact, the buyer may be unsure of his own attitude towards risk --- how much is he willing to pay upfront for future use of the product? We design approximately optimal posted pricing based mechanisms that are robust with regards to information, or lack thereof, about the buyer's value profile and risk attitude.