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Becoming the Neighbor Bidder: Endogenous Winner’s Curse in Dynamic Mechanisms

  • Alejandro Francetich
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    This paper addresses the problem of sequentially allocating timesensitive goods, or one-period leases on a durable good, among agents who compete through time and learn about the common component of the value of the allocation through experience. I show that efficiency is unattainable, and I identify simple variations of sequential second-price or English auctions that implement the second best and the revenuemaximizing auction. When the units are divisible, I also identify the corresponding auctions that allow for double sourcing.Keywords: Dynamic mechanism design, sequential auctions, interdependent values, multi-dimensional types, winner’s curse, double sourcing JEL Classification Numbers: D82, D86

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    File URL: ftp://ftp.igier.unibocconi.it/wp/2013/501.pdf
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    Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 501.

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    Date of creation: 2013
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    Handle: RePEc:igi:igierp:501
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    10. Brusco, Sandro, 2006. "Perfect Bayesian implementation in economic environments," Journal of Economic Theory, Elsevier, vol. 129(1), pages 1-30, July.
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    15. Anton, James J. & Brusco, Sandro & Lopomo, Giuseppe, 2010. "Split-award procurement auctions with uncertain scale economies: Theory and data," Games and Economic Behavior, Elsevier, vol. 69(1), pages 24-41, May.
    16. Hendricks, Kenneth & Porter, Robert H, 1988. "An Empirical Study of an Auction with Asymmetric Information," American Economic Review, American Economic Association, vol. 78(5), pages 865-83, December.
    17. Bikhchandani, Sushil, 2006. "Ex post implementation in environments with private goods," Theoretical Economics, Econometric Society, vol. 1(3), pages 369-393, September.
    18. Larson, Nathan, 2009. "Private value perturbations and informational advantage in common value auctions," Games and Economic Behavior, Elsevier, vol. 65(2), pages 430-460, March.
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    20. Engelbrecht-Wiggans, Richard & Milgrom, Paul R. & Weber, Robert J., 1983. "Competitive bidding and proprietary information," Journal of Mathematical Economics, Elsevier, vol. 11(2), pages 161-169, April.
    21. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
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