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Auctions with Dynamic Populations: Efficiency and Revenue Maximization

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Author Info
Said, Maher

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Abstract

We study a setting where objects and privately-informed buyers arrive stochastically to a market. A seller in this setting faces a sequential allocation problem with a dynamic population. We derive both efficient and revenue-maximizing incentive compatible direct mechanisms. Our main result shows that the sequential ascending auction is a simple indirect mechanism that achieves these desirable objectives. We construct equilibria in memoryless strategies where, in every period, bidders reveal all private information. These equilibria are outcome equivalent to the direct mechanisms. In contrast to static settings, sequential second-price auctions cannot yield these outcomes, as they do not reveal sufficient information.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11456.

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Date of creation: 20 Aug 2009
Date of revision: 20 Aug 2009
Handle: RePEc:pra:mprapa:11456

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Related research
Keywords: Dynamic mechanism design; Sequential allocation; Random arrivals; Revenue equivalence; Indirect mechanisms; Sequential ascending auctions.;

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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  1. Jeffrey S. Banks & John O. Ledyard & David P. Porter, 1989. "Allocating Uncertain and Unresponsive Resources: An Experimental Approach," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 1-25, Spring. [Downloadable!] (restricted)
  2. Rothkopf, Michael H & Teisberg, Thomas J & Kahn, Edward P, 1990. "Why Are Vickrey Auctions Rare?," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 94-109, February. [Downloadable!] (restricted)
  3. Dirk Bergemann & Juuso Valimaki, 2008. "The Dynamic Pivot Mechanism," Cowles Foundation Discussion Papers 1672, Cowles Foundation, Yale University. [Downloadable!]
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  4. Hendon, Ebbe & Jacobsen, Hans Jorgen & Sloth, Birgitte, 1996. "The One-Shot-Deviation Principle for Sequential Rationality," Games and Economic Behavior, Elsevier, vol. 12(2), pages 274-282, February. [Downloadable!] (restricted)
  5. Susan Athey & Ilya Segal, 2007. "An Efficient Dynamic Mechanism," Levine's Bibliography 122247000000001134, UCLA Department of Economics. [Downloadable!]
  6. Robert J. Dolan, 1978. "Incentive Mechanisms for Priority Queuing Problems," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 421-436, Autumn. [Downloadable!] (restricted)
  7. Perea, Andres, 2002. "A note on the one-deviation property in extensive form games," Games and Economic Behavior, Elsevier, vol. 40(2), pages 322-338, August. [Downloadable!] (restricted)
  8. Kagel, John H & Harstad, Ronald M & Levin, Dan, 1987. "Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study," Econometrica, Econometric Society, vol. 55(6), pages 1275-1304, November. [Downloadable!] (restricted)
  9. Vijay Krishna & Motty Perry, 1997. "Efficient Mechanism Design," Game Theory and Information 9703010, EconWPA, revised 28 Apr 1998. [Downloadable!]
  10. Lawrence M. Ausubel, 2004. "An Efficient Ascending-Bid Auction for Multiple Objects," American Economic Review, American Economic Association, vol. 94(5), pages 1452-1475, December. [Downloadable!]
  11. Said, Maher, 2008. "Information Revelation in Sequential Ascending Auctions," MPRA Paper 7160, University Library of Munich, Germany, revised 07 Oct 2008. [Downloadable!]
  12. Mallesh Pai & Rakesh Vohra, 2008. "Optimal Dynamic Auctions," Discussion Papers 1461, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  13. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September. [Downloadable!] (restricted)
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