The problem of arriving at a principled method of pricing goods and services
was very satisfactorily solved for conventional goods; however, this solution
is not applicable to digital goods. After taking into consideration
idiosyncrasies of the digital realm, we give a market model that is appropriate
for the digital setting, and a notion of equilibrium for it. We also prove
existence of equilibrium for our market model.
We consider a market with a set of unit demand buyers and a set of
heterogeneous goods. We assume that the utility of each buyer $i$ from a good
$j$ can be any arbitrary but continuous and decreasing function of price of $j$
and is not necessarily quasi-linear (note that we can model any \emph{smooth
budget constraint} in this form). We give a constructive proof for the
existence of Walrasian equilibria and show that set of Walrasian equilibria
form a complete lattice.
We present an algorithm for the asymmetric traveling salesman problem on
instances which satisfy the triangle inequality. Like several existing
algorithms, it achieves approximation ratio O(log n). Unlike previous
algorithms, it uses randomized rounding.