Dynamic posted price mechanisms

Abstract We consider the problem of selling a single commodity in unlimited supply, e.g., a digital good, by a dynamic "posted price " mechanism. In such a mechanism, each consumer is offered a price for their receipt of an item and they can choose to accept or reject the offer. The mechanism can use previous consumers ' responses when setting prices for subsequent consumers. We show that a two round posted price mechanism can come within a factor of four of optimal for mass markets. Thus the penalty for using a dynamic posted price instead of running an auction is also at most a factor of four