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The Dynamic Pivot Mechanism

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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: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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

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  1. Robert J. Dolan, 1978. "Incentive Mechanisms for Priority Queuing Problems," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 421-436, Autumn.
  2. Bergemann, Dirk & Valimaki, Juuso, 2003. "Dynamic common agency," Journal of Economic Theory, Elsevier, vol. 111(1), pages 23-48, July.
  3. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
  4. 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.
  5. Moulin, H., 1986. "Characterizations of the pivotal mechanism," Journal of Public Economics, Elsevier, vol. 31(1), pages 53-78, October.
  6. 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.
  7. Courty, Pascal & Li, Hao, 2000. "Sequential Screening," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 697-717, October.
  8. Marco Battaglini, 2005. "Long-Term Contracting with Markovian Consumers," American Economic Review, American Economic Association, vol. 95(3), pages 637-658, June.
  9. 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.
  10. Baron, David P. & Besanko, David, 1984. "Regulation and information in a continuing relationship," Information Economics and Policy, Elsevier, vol. 1(3), pages 267-302.
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Citations

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Cited by:
  1. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Paper Series dp662, The Center for the Study of Rationality, Hebrew University, Jerusalem.
  2. 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.
  3. Daley, Brendan & Schwarz, Michael & Sonin, Konstantin, 2012. "Efficient investment in a dynamic auction environment," Games and Economic Behavior, Elsevier, vol. 75(1), pages 104-119.
  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.
  5. Dirk Bergemann & Juuso Valimaki, 2011. "Efficient Search by Committee," Cowles Foundation Discussion Papers 1782, Cowles Foundation for Research in Economics, Yale University.
  6. Mierendorff, Konrad, 2013. "The Dynamic Vickrey Auction," Games and Economic Behavior, Elsevier, vol. 82(C), pages 192-204.
  7. 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.
  8. Alejandro Francetich, 2013. "Becoming the Neighbor Bidder: Endogenous Winner’s Curse in Dynamic Mechanisms," Working Papers 501, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  9. Drexl, Moritz & Kleiner, Andreas, 2013. "Preference Intensities in Repeated Collective Decision-Making," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79832, Verein für Socialpolitik / German Economic Association.
  10. Said, Maher, 2012. "Auctions with dynamic populations: Efficiency and revenue maximization," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2419-2438.

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