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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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    15. 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.
    16. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1999. "Multidimensional Mechanism Design for Auctions with Externalities," Journal of Economic Theory, Elsevier, vol. 85(2), pages 258-293, April.
    17. Dorothy E. Klotz & Kalyan Chatterjee, 1995. "Dual Sourcing in Repeated Procurement Competitions," Management Science, INFORMS, vol. 41(8), pages 1317-1327, August.
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