Robert Kleinberg: Descending Price Coordinates Approximately Efficient Search

Speaker: Robert Kleinberg (Cornell, Microsoft New England)

Title:  Descending Price Coordinates Approx

Abstract:

When exploring acquisition targets, firms typically begin with the possibilities offering greatest option value and work their way down, as prescribed by optimal search theory. Yet the market designs economists have often prescribed, involving simultaneous or ascending prices, stymie this process. As a result they may be arbitrarily inefficient when one accounts for the costs bidders must invest to learn their value for acquiring different items. We present a model that incorporates such costs, and a simple descending price procedure that we prove robustly approximates the fully optimal sequential search process quite generally. Our results exploit a novel characterization of Weitzman (1979)’s “Pandora’s Box” problem in terms of option pricing theory that connects seamlessly with recent techniques from algorithmic mechanism design.

This is joint work with Bo Waggoner and Glen Weyl. The paper may be found at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2753858.

Bio:

Bobby Kleinberg is an Associate Professor of Computer Science at Cornell University and a Principal Researcher at Microsoft Research New England. His research studies the design and analysis of algorithms, and their applications to economics, networking, information retrieval, and other areas. Prior to receiving his doctorate from MIT in 2005, Kleinberg spent three years at Akamai Technologies, where he assisted in designing the world's largest Internet Content Delivery Network. He is the recipient of a Microsoft Research New Faculty Fellowship, an Alfred P. Sloan Foundation Fellowship, and an NSF CAREER Award.