Fixed-Price Diffusion Mechanism Design

Tianyi Zhang, Dengji Zhao, Wen Zhang, Xuming He

Abstract: We consider a fixed-price mechanism design setting where a seller sells one item via a social network. Each buyer in the network has a valuation of the item independently derived from a given continuous distribution. Initially, the seller can only directly communicate with her neighbors and sells the item among them. In order to get a higher revenue, she needs more buyers to participate in the sale. One recent solution is to design dedicated mechanisms to incentivize buyers to invite their neighbors to join the sale, but they have relatively high time complexity and may evoke concern for privacy. We propose the very first fixed-price mechanism to achieve the same goal with less time complexity and better preservation of privacy. It improves the maximal expected revenue of the fixed-price mechanism without diffusion. Especially, when the valuation distribution is uniform on [0, 1], it guarantees a lower bound of the improvement.