Information diffusion mechanism maximizing expected revenue

• 1、 ShanghaiTech University, Shanghai 201210
• 2、Chinese Academy of Science,Shanghai Institute of Microsystem & Information Technology, Shanghai 200050, People's R China
• 3、 University of Chinese Academy of Science, Beijing 100049, People's R China

Abstract：In the traditional auction mechanism, the number of agents affects the effectiveness of the auction. To enlarge the number of agents, the seller often uses social media and search engines to do advertisement. But whether the advertisers actually benefit from their advertisements is not clear and is difficult to predict. Hence the Information Diffusion Mechanism (IDM) is introduced, in which auction information is propagated by the potential buyers who are incentivized by the possible profit, whereas the seller is guaranteed to have a non-negative revenue. However, IDM mechanism can not maximize the seller\'s revenue. We maximize it for two structures of social networks. Firstly, for the social networks of complete binary tree structure, the seller\'s revenue is maximized by adding optimal reserve price into the mechanism. Secondly, for the social networks of graph structure, the seller\'s revenue is maximized by adding the optimal reserve price and the virtual value. At last an optimal pricing strategy for multiple items auction is proposed by using optimal reserve price. It can provide pricing and sales strategies for e-commerce so as to obtain maximum revenue. Note the marginal cost considered in the latter case is set as a constant, which limits our schemes\' application in practice. So, in the future work, we will generalize the constant marginal cost into a marginal cost function to conduct our schemes.

Keywords： Information Diffusion Mechanism Complete Binary Tree optimal reserve price virtual value optimal pricing strategy