Truth-Telling Reservations
24 Pages Posted: 9 Aug 2005
Date Written: July 17, 2005
Abstract
We present a mechanism for reservations of bursty resources that is both truthful and robust. It consists of option contracts whose pricing structure induces users to reveal the true likelihoods that they will purchase a given resource. Users are also allowed to adjust their options as their likelihood changes. This scheme helps users save cost and the providers to plan ahead so as to reduce the risk of under-utilization and overbooking. The mechanism extracts revenue similar to that of a monopoly provider practicing temporal pricing discrimination with a user population whose preference distribution is known in advance.
Keywords: Contract design, truth-telling
JEL Classification: D82
Suggested Citation: Suggested Citation