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Published November 10, 2016 | Submitted
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Bundling Customers: How to Exploit Trust Among Customers to Maximize Seller Profit


We consider an auction of identical digital goods to customers whose valuations are drawn independently from known distributions. Myerson's classic result identifies the truthful mechanism that maximizes the seller's expected profit. Under the assumption that in small groups customers can learn each others' valuations, we show how Myerson's result can be improved to yield a higher payoff to the seller using a mechanism that offers groups of customers to buy bundles of items.

Additional Information

Submitted on 5 Feb 2012 (v1), last revised 4 Apr 2012 (this version, v2) October 28, 2013. Supported by a Sloan fellowship in Mathematics, by BSF grant 2004105, by NSF Career Award (DMS 054829) by ONR award N00014-07-1-0506 and by ISF grant 1300/08 Weizmann Institute. Supported by ISF grant 1300/08. Omer Tamuz is a recipient of the Google Europe Fellowship in Social Computing, and this research is supported in part by this Google Fellowship.

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