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Efficient investment in a dynamic auction environment

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

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.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 75 (2012)
Issue (Month): 1 ()
Pages: 104-119

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Handle: RePEc:eee:gamebe:v:75:y:2012:i:1:p:104-119
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  22. Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June.
  23. Ye, Lixin, 2007. "Indicative bidding and a theory of two-stage auctions," Games and Economic Behavior, Elsevier, vol. 58(1), pages 181-207, January.
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