Optimal Pricing for Optimal Transport

Abstract

Suppose that c(x, y) is the cost of transporting a unit of mass from x ∈ X to y ∈ Y and suppose that a mass distribution μ on X is transported optimally (so that the total cost of transportation is minimal) to the mass distribution ν on Y. Then, roughly speaking, the Kantorovich duality theorem asserts that there is a price f(x) for a unit of mass sold (say by the producer to the distributor) at x and a price g(y) for a unit of mass sold (say by the distributor to the end consumer) at y such that for any x ∈ X and y ∈ Y, the price difference g(y) − f(x) is not greater than the cost of transportation c(x, y) and such that there is equality g(y) − f(x) = c(x, y) if indeed a nonzero mass was transported (via the optimal transportation plan) from x to y. We consider the following optimal pricing problem: suppose that a new pricing policy is to be determined while keeping a part of the optimal transportation plan fixed and, in addition, some prices at the sources of this part are also kept fixed. From the producers’ side, what would then be the highest compatible pricing policy possible? From the consumers’ side, what would then be the lowest compatible pricing policy possible? We have recently introduced and studied settings in c-convexity theory which gave rise to families of c-convex c-antiderivatives, and, in particular, we established the existence of optimal c-convex c-antiderivatives and explicit constructions of these optimizers were presented. In applications, it has turned out that this is a unifying language for phenomena in analysis which used to be considered quite apart. In the present paper we employ optimal c-convex c-antiderivatives and conclude that these are natural solutions to the optimal pricing problems mentioned above. This type of problems drew attention in the past and existence results were previously established in the case where X = Y = ℝn under various specifications. We solve the above problem for general spaces X, Y and real-valued, lower semicontinuous cost functions c. Furthermore, an explicit construction of solutions to the general problem is presented.