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Efficient investment in a dynamic auction environment

Author

Listed:
  • Daley, Brendan
  • Schwarz, Michael
  • Sonin, Konstantin

Abstract

We analyze an environment in which biddersʼ private values change over time due to both private investments and exogenous shocks. We demonstrate that a highly-decentralized mechanism achieves efficiency. The mechanism requires a stage of costly public announcements (i.e., signaling) to induce efficient investment. For this reason, an equilibrium selection issue arises, but can be handled by a minor modification in the spirit of virtual implementation.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:gamebe:v:75:y:2012:i:1:p:104-119
    DOI: 10.1016/j.geb.2011.11.006
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    References listed on IDEAS

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    Cited by:

    1. McAdams, David, 2015. "On the benefits of dynamic bidding when participation is costly," Journal of Economic Theory, Elsevier, vol. 157(C), pages 959-972.

    More about this item

    Keywords

    Auctions; Efficient mechanism design; Signaling;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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