An optimization framework for mechanism design in the digital sharing economy

This paper introduces a conceptual framework for optimizing mechanism design in the context of the digital sharing economy. Mechanism optimization aims to identify the most effective mechanism that aligns with market designers’ objectives while ensuring the attainment of Nash Equilibrium within a defined set of mechanisms. We present a versatile mechanism optimization technique based on the Weighted Surplus Welfare Maximizer (WSWM), which can be applied across a range of sharing economy industries. We build a mixed integer quadratic constrained model for the optimization of WSWM mechanism. To handle large instances efficiently, we embed targeted linear programming subproblems inside a meta-heuristic search, using the linear programming solutions to steer the search and accelerate convergence. A first-mile airport ridesharing example is provided to illustrate the adaptability and versatility of our methodology.