Dynamic Revenue Maximization: A Continuous Time Approach

Dirk Bergemann and Philipp Strack ()

No 1953R2, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We characterize the revenue-maximizing mechanism for time separable allocation problems in continuous time. The valuation of each agent is private information and changes over time. At the time of contracting every agent privately observes his initial type which influences the evolution of his valuation process. The leading example is the repeated sales of a good or a service. We derive the optimal dynamic mechanism, analyze its qualitative structure and frequently derive its closed form solution. This enables us to compare the distortion in various settings. In particular, we discuss the cases where the type of each agent follows an arithmetic or geometric Brownian motion or a mean reverting process. We show that depending on the nature of the private information the distortion might increase or decrease over time.

Keywords: Mechanism design; Dynamic auctions; Repeated sales; Impulse response function; Stochastic flow (search for similar items in EconPapers)
JEL-codes: D44 D82 D83 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2014-07, Revised 2015-01
New Economics Papers: this item is included in nep-mic and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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Related works:
Journal Article: Dynamic revenue maximization: A continuous time approach (2015)
Working Paper: Dynamic Revenue Maximization: A Continuous Time Approach (2015)
Working Paper: Dynamic Revenue Maximization: A Continuous Time Approach (2015)
Working Paper: Dynamic Revenue Maximization: A Continuous Time Approach (2014)
Working Paper: Dynamic Revenue Maximization: A Continuous Time Approach (2014)
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