Efficient Allocation and Pricing of Multi-Featured Items

Abstract

We introduce feature valuations, a new class of valuations that compactly capture preferences of agents who value items based on the features they possess. Such preferences are relevant in many important practical settings, such as Internet advertising markets (where impressions have associated attributes), labor markets (where workers’ skills/titles correspond to features), long-term bond markets (where coupon payments can be associated with features). We focus on settings where features can be organized in a tree network, and features possessed by items are captured by paths on the tree. In such settings, under appropriate consistency conditions, we establish that Walrasian equilibria exist. In addition, we provide a computationally tractable price update algorithm that terminates with market-clearing prices that support an efficient outcome.

Keywords: Auction design, iterative auctions, Walrasian equilibrium, network flows