Said, Maher (2008): Auctions with Dynamic Populations: Efficiency and Revenue Maximization.
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We examine an environment where goods and privately informed buyers arrive stochastically to a market. A seller in this setting faces a sequential allocation problem with a changing population. We characterize the set of incentive compatible allocation rules and provide a generalized revenue equivalence result. In contrast to a static setting where incentive compatibility implies that higher-valued buyers have a greater likelihood of receiving an object, in this dynamic setting, incentive compatibility implies that higher-valued buyers have a greater likelihood of receiving an object sooner.
We also characterize the set of efficient allocation rules and show that a dynamic Vickrey-Clarke-Groves mechanism is efficient and dominant strategy incentive compatible. We then derive an optimal direct mechanism. We show that the revenue-maximizing direct mechanism is a pivot mechanism with a reserve price.
Finally, we consider sequential ascending auctions in this setting, both with and without a reserve price. We construct memoryless equilibrium bidding strategies in this indirect mechanism. Bidders reveal their private information in every period, yielding the same outcomes as the direct mechanisms. Thus, the sequential ascending auction is a natural institution for achieving either efficient or optimal outcomes. Interestingly, this is not the case for sequential second-price auctions, as the bids in a second-price auction do not reveal sufficient information to realize either the efficient or optimal allocation.
|Item Type:||MPRA Paper|
|Original Title:||Auctions with Dynamic Populations: Efficiency and Revenue Maximization|
|Keywords:||Dynamic mechanism design; Random arrivals; Revenue equivalence; Indirect mechanisms; Sequential ascending auctions|
|Subjects:||D - Microeconomics > D4 - Market Structure and Pricing > D44 - Auctions
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information; Mechanism Design
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
|Depositing User:||Maher Said|
|Date Deposited:||20. Nov 2008 01:21|
|Last Modified:||13. Feb 2013 02:37|
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Available Versions of this Item
Auctions with Dynamic Populations: Efficiency and Revenue Maximization. (deposited 20. Nov 2008 01:21)
Auctions with Dynamic Populations: Efficiency and Revenue Maximization. (deposited 30. Apr 2009 00:32)
- Auctions with Dynamic Populations: Efficiency and Revenue Maximization. (deposited 05. May 2009 23:54)
- Auctions with Dynamic Populations: Efficiency and Revenue Maximization. (deposited 30. Apr 2009 00:32)