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Dynamic allocation and pricing: A mechanism design approach

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  • Gershkov, Alex
  • Moldovanu, Benny

Abstract

This paper illustrates the benefits of applying mechanism design techniques to questions in revenue management, in particular to dynamic allocation and pricing problems. It is demonstrated that the solution to a sequential stochastic assignment problem under complete information can also be implemented under incomplete information by a variation of the Vickrey–Clarke–Groves mechanism. More generally, we argue that the mechanism design focus on implementable allocations rather than on prices yields many valuable insights about dynamic RM models. Finally, we also briefly survey some of the recent literature on dynamic mechanism design.

Suggested Citation

  • Gershkov, Alex & Moldovanu, Benny, 2012. "Dynamic allocation and pricing: A mechanism design approach," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 283-286.
  • Handle: RePEc:eee:indorg:v:30:y:2012:i:3:p:283-286
    DOI: 10.1016/j.ijindorg.2011.12.008
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    References listed on IDEAS

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    1. Pascal Courty & Li Hao, 2000. "Sequential Screening," Review of Economic Studies, Oxford University Press, vol. 67(4), pages 697-717.
    2. Jehiel, Philippe & Moldovanu, Benny, 2001. "Efficient Design with Interdependent Valuations," Econometrica, Econometric Society, vol. 69(5), pages 1237-1259, September.
    3. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721, April.
    4. Gale, Ian L & Holmes, Thomas J, 1993. "Advance-Purchase Discounts and Monopoly Allocation of Capacity," American Economic Review, American Economic Association, vol. 83(1), pages 135-146, March.
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    6. Dizdar, Deniz & Gershkov, Alex & Moldovanu, Benny, 2011. "Revenue maximization in the dynamic knapsack problem," Theoretical Economics, Econometric Society, vol. 6(2), May.
    7. Guillermo Gallego & Garrett van Ryzin, 1994. "Optimal Dynamic Pricing of Inventories with Stochastic Demand over Finite Horizons," Management Science, INFORMS, vol. 40(8), pages 999-1020, August.
    8. Alex Gershkov & Benny Moldovanu, 2009. "Dynamic Revenue Maximization with Heterogeneous Objects: A Mechanism Design Approach," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 168-198, August.
    9. Nocke, Volker & Peitz, Martin & Rosar, Frank, 2011. "Advance-purchase discounts as a price discrimination device," Journal of Economic Theory, Elsevier, vol. 146(1), pages 141-162, January.
    10. Partha Dasgupta & Eric Maskin, 2000. "Efficient Auctions," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 341-388.
    11. Susan Athey & Ilya Segal, 2013. "An Efficient Dynamic Mechanism," Econometrica, Econometric Society, vol. 81(6), pages 2463-2485, November.
    12. Gershkov, Alex & Moldovanu, Benny, 2010. "Efficient sequential assignment with incomplete information," Games and Economic Behavior, Elsevier, vol. 68(1), pages 144-154, January.
    13. S. Christian Albright, 1974. "Optimal Sequential Assignments with Random Arrival Times," Management Science, INFORMS, vol. 21(1), pages 60-67, September.
    14. Alex Gershkov & Benny Moldovanu, 2009. "Learning about the Future and Dynamic Efficiency," American Economic Review, American Economic Association, vol. 99(4), pages 1576-1587, September.
    15. Wang, Ruqu, 1993. "Auctions versus Posted-Price Selling," American Economic Review, American Economic Association, vol. 83(4), pages 838-851, September.
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    Citations

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    Cited by:

    1. Hao Li & Xianwen Shi, 2013. "Discriminatory Information Disclosure," Working Papers tecipa-497, University of Toronto, Department of Economics.
    2. Mierendorff, Konrad, 2016. "Optimal dynamic mechanism design with deadlines," Journal of Economic Theory, Elsevier, vol. 161(C), pages 190-222.
    3. Philippe Choné & Romain De Nijs & Lionel Wilner, 2012. "Intertemporal Pricing with Unobserved Consumer Arrival Times," Working Papers 2012-23, Center for Research in Economics and Statistics.
    4. Qingmin Liu & Konrad Mierendorff & Xianwen Shi, 2013. "Auctions with Limited Commitment," Working Papers tecipa-504, University of Toronto, Department of Economics.

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