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Incentive-aware Contextual Pricing with Non-parametric Market Noise

Negin Golrezaei · Patrick Jaillet · Jason Cheuk Nam Liang

Auditorium 1 Foyer 93


We consider a dynamic pricing problem for repeated contextual second-price auctions with multiple strategic buyers who aim to maximize their long-term time discounted utility. The seller has limited information on buyers' overall demand curves which depends on a non-parametric market-noise distribution, and buyersmay potentially submit corrupted bids (relative to true valuations) to manipulate the seller's pricing policy for more favorable reserve prices in the future. We focus on designing the seller's learning policy to set contextual reserve prices where the seller's goal is to minimize regret compared to the revenue of a benchmark clairvoyant policy that has full information of buyers' demand. We propose a policy with a phased-structure that incorporates randomized ``isolation" periods, during which a buyer is randomly chosen to solely participate in the auction. We show that this design allows the seller to control the number of periods in which buyers significantly corrupt their bids. We then prove that our policy enjoys a T-period regret of O(\sqrt{T}) facing strategic buyers. Finally, we conduct numerical simulations to compare our proposed algorithm to standard pricing policies. Our numerical results show that our algorithm outperforms these policies under various buyer bidding behavior.

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