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Dynamic Marginal Contribution Mechanism

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  • Dirk Bergemann
  • Juuso Välimäki

Abstract

We consider truthful implementation of the socially efficient allocation in a dynamic private value environment in which agents receive private information over time. We propose a suitable generalization of the Vickrey-Clarke-Groves mechanism, based on the marginal contribution of each agent. In the marginal contribution mechanism, the ex post incentive and ex post participations constraints are satisfied for all agents after all histories. It is the unique mechanism satisfying ex post incentive, ex post participation and efficient exit conditions. We develop the marginal contribution mechanism in detail for a sequential auction of a single object in which each bidders learn over time her true valuation of the object. We show that a modified second price auction leads to truthtelling.
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Suggested Citation

  • Dirk Bergemann & Juuso Välimäki, 2007. "Dynamic Marginal Contribution Mechanism," Levine's Bibliography 843644000000000300, UCLA Department of Economics.
    • Handle: RePEc:cla:levrem:843644000000000300
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    References listed on IDEAS

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    1. Ilya Segal & Susan Athey, 2007. "Designing Efficient Mechanisms for Dynamic Bilateral Trading Games," American Economic Review, American Economic Association, vol. 97(2), pages 131-136, May.
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    6. Xavier Freixas & Roger Guesnerie & Jean Tirole, 1985. "Planning under Incomplete Information and the Ratchet Effect," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(2), pages 173-191.
    7. Edward Clarke, 1971. "Multipart pricing of public goods," Public Choice, Springer, vol. 11(1), pages 17-33, September.
    8. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
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    Cited by:

    1. Gershkov, Alex & Moldovanu, Benny, 2012. "Optimal search, learning and implementation," Journal of Economic Theory, Elsevier, vol. 147(3), pages 881-909.
    2. Deb, Rahul, 2008. "Optimal Contracting Of New Experience Goods," MPRA Paper 9880, University Library of Munich, Germany.
    3. Benny Moldovanu & Alex Gershkov, 2008. "The Trade-off Between Fast Learning and Dynamic Efficiency," 2008 Meeting Papers 348, Society for Economic Dynamics.
    4. Said, Maher, 2008. "Information Revelation and Random Entry in Sequential Ascending Auctions," MPRA Paper 7160, University Library of Munich, Germany.

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    More about this item

    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, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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