Efficient Dynamic Auctions

Dirk Bergemann and Juuso Välimäki

No 1584, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We consider the truthful implementation of the socially efficient allocation in a dynamic private value environment in which agents receive private information over time. We show that a suitable generalization of the Vickrey-Clark-Groves mechanism, based on the marginal contribution of each agent, leads to truthtelling in every period. A leading example of a dynamic allocation model is the sequential auction of a single good in which the current winner of the object receives additional information about her valuation. We show that a modified sequential second price auction in which only the current winner makes a positive payment leads to truthtelling. In general allocation problems, the marginal contribution mechanism continues to induce truthtelling in every period but may now include positive transfers for many agents.

Keywords: Vickrey Auction; Marginal Contribution; Dynamic Allocation Index; Multi-Armed Bandit; Bayesian Learning; Experimentation; Matching (search for similar items in EconPapers)
JEL-codes: C72 C73 D43 D83 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2006-10
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Efficient Dynamic Auctions (2006)
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