A Sublogarithmic Approximation for Tollbooth Pricing on Trees

• Published in: Mathematics of operations research Vol. 42; no. 2; pp. 377 - 388
• Main Authors: Gamzu, Iftah, Segev, Danny
• Format: Journal Article
• Language: English
• Published: Linthicum INFORMS 01.05.2017; Institute for Operations Research and the Management Sciences
• Subjects: Algorithms; Approximation; approximation algorithms; balanced decompositions; Customers; Graph theory; highway problem; Mathematical analysis; Mathematical research; Methods; Operations research; Pricing; randomization; Revenue; segment guessing; Studies; tollbooth problem; Tolls; Trees; Trees (Graph theory)
• ISSN: 0364-765X; 1526-5471
• DOI: 10.1287/moor.2016.0803

An instance of the tollbooth problem consists of an undirected network and a collection of single-minded customers, each of which is interested in purchasing a fixed path subject to an individual budget constraint. The objective is to assign a per-unit price to each edge in a way that maximizes the collective revenue obtained from all customers. The revenue generated by any customer is equal to the overall price of the edges in her desired path, when this cost falls within her budget; otherwise, that customer will not purchase any edge. Our main result is a deterministic algorithm for the tollbooth problem on trees whose approximation ratio is O (log m /log log m ), where m denotes the number of edges in the underlying graph. This finding improves on the currently best performance guarantees for trees, and up until recently, also on the best ratio for paths (commonly known as the highway problem). An additional interesting consequence is a computational separation between tollbooth pricing on trees and the original prototype problem of single-minded unlimited supply pricing, under a plausible hardness hypothesis.