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Abstract

We consider truthful implementation of the socially efficient allocation in an independent private-value environment in which agents receive private information over time. We propose a suitable generalization of the pivot mechanism, based on the marginal contribution of each agent. In the dynamic pivot mechanism, the ex-post incentive and ex-post participation constraints are satisfied for all agents after all histories. In an environment with diverse preferences it is the unique mechanism satisfying ex-post incentive, ex-post participation and efficient exit conditions. We develop the dynamic pivot mechanism in detail for a repeated auction of a single object in which each bidder learns over time her true valuation of the object. The dynamic pivot mechanism here is equivalent to a modified second price auction.

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File URL: http://cowles.econ.yale.edu/P/cd/d16b/d1672-r.pdf
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Bibliographic Info

Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1672R.

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Length: 30 pages
Date of creation: Aug 2008
Date of revision: Dec 2009
Publication status: Published in Econometrica (March 2010), 78(2): 771-789
Handle: RePEc:cwl:cwldpp:1672r

Note: CFP 1293, includes supplement
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Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

Related research

Keywords: Pivot mechanisms; Dynamic mechanism design; Ex-post equilibrium; Marginal contribution; Multi-armed bandit; Bayesian learning;

Other versions of this item:

Find related papers by JEL classification:

• C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
• C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
• D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
• D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information

References

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1. Pascal Courty & Li Hao, 1997. "Sequential screening," Economics Working Papers 224, Department of Economics and Business, Universitat Pompeu Fabra.
   
   • Courty, Pascal & Li, Hao, 2000. "Sequential Screening," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 697-717, October.
2. Marco Battaglini, 2005. "Long-Term Contracting with Markovian Consumers," American Economic Review, American Economic Association, vol. 95(3), pages 637-658, June.
   
   • Marco Battaglini, 2003. "Long-Term Contracting with Markovian Consumers," Theory workshop papers 505798000000000048, UCLA Department of Economics.
3. Baron, David P. & Besanko, David, 1984. "Regulation and information in a continuing relationship," Information Economics and Policy, Elsevier, vol. 1(3), pages 267-302.
4. Freixas, Xavier & Guesnerie, Roger & Tirole, Jean, 1985. "Planning under Incomplete Information and the Ratchet Effect," Review of Economic Studies, Wiley Blackwell, vol. 52(2), pages 173-91, April.
5. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
6. Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2007. "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords," American Economic Review, American Economic Association, vol. 97(1), pages 242-259, March.
   
   • Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2005. "Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords," NBER Working Papers 11765, National Bureau of Economic Research, Inc.
7. Green, Jerry & Laffont, Jean-Jacques, 1977. "Characterization of Satisfactory Mechanisms for the Revelation of Preferences for Public Goods," Econometrica, Econometric Society, vol. 45(2), pages 427-38, March.
8. Moulin, H., 1986. "Characterizations of the pivotal mechanism," Journal of Public Economics, Elsevier, vol. 31(1), pages 53-78, October.
9. Dirk & Juuso Valimaki, 1998. "Dynamic Common Agency," Cowles Foundation Discussion Papers 1206, Cowles Foundation for Research in Economics, Yale University.
   
   • Bergemann, Dirk & Valimaki, Juuso, 2003. "Dynamic common agency," Journal of Economic Theory, Elsevier, vol. 111(1), pages 23-48, July.
   • Dirk Bergemann & Juuso Valimaki, 1998. "Dynamic Common Agency," Discussion Papers 1259, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
10. Robert J. Dolan, 1978. "Incentive Mechanisms for Priority Queuing Problems," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 421-436, Autumn.

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Citations

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Cited by:

1. Krähmer, Daniel & Strausz, Roland, 2010. "Optimal Procurement Contracts with Pre–Project Planning," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 303, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
2. Said, Maher, 2008. "Auctions with Dynamic Populations: Efficiency and Revenue Maximization," MPRA Paper 11456, University Library of Munich, Germany.
   
   • Said, Maher, 2012. "Auctions with dynamic populations: Efficiency and revenue maximization," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2419-2438.
3. Hitoshi Matsushima, 2011. "Efficient Combinatorial Exchanges," CIRJE F-Series CIRJE-F-826, CIRJE, Faculty of Economics, University of Tokyo.
   
   • Hitoshi Matsushima, 2011. "Efficient Combinatorial Exchanges," CARF F-Series CARF-F-258, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
4. Francis Bloch & David Cantala, 2010. "Markovian assignment rules," Serie documentos de trabajo del Centro de Estudios Económicos 2010-18, El Colegio de México, Centro de Estudios Económicos.
   
   • Francis Bloch & David Cantala, 2008. "Markovian assignment rules," Working Papers hal-00356304, HAL.
5. Dirk Bergemann & Juuso Valimaki, 2011. "Efficient Search by Committee," Cowles Foundation Discussion Papers 1782, Cowles Foundation for Research in Economics, Yale University.
   
   • Dirk Bergemann & Juuso Valimaki, 2011. "Efficient Search by Committee," Levine's Working Paper Archive 786969000000000020, David K. Levine.
6. Ralph Boleslavsky & Maher Said, 2011. "Progressive Screening: Long-Term Contracting with a Privately Known Stochastic Process," Working Papers 2011-5, University of Miami, Department of Economics.
   
   • Raphael Boleslavsky & Maher Said, 2013. "Progressive Screening: Long-Term Contracting with a Privately Known Stochastic Process," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 1-34.

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