Mechanism Design

Buying to Bundle: Asymptotic Optimality of Surrogate BundlingResearch Paper

A platform sourcing items from monopolistic sellers with private quality cannot tractably maximize its true profit: the bundle revenue $Rev(v_S)$ is neither monotone, submodular, supermodular, subadditive, nor superadditive. Theorem 4.6 of *Buying to Bundle: Optimal Sourcing from Monopolistic Sellers* shows that the simple surrogate threshold mechanism — maximize the linearized objective $\varpi(x)=N\,E[x(\mu)(\mu-\varphi(\mu))]$ — is profit-optimal up to a $1+O(N^{-1/3})$ factor in large markets. Prove it: Bernoulli concentration for the bundle quality plus sub-exponential control of the dispersion gap $|Rev(v)-E[v]|$ (Lemma 4.5).