Dynamic Mechanism Design: Dynamic Arrivals and Changing Values

Daniel Garrett

No 17-830, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We study the optimal mechanism in a dynamic sales relationship where the buyerís arrival date is uncertain, and where his value changes stochastically over time. The buyerís arrival date is the Örst date at which contracting is feasible and is his private information. To induce immediate participation, the buyer is granted positive expected rents even if his value at arrival is the lowest possible. The buyer is punished for arriving late; i.e., he expects to earn less of the surplus. Optimal allocations for a late arriver are also further distorted below Örst-best levels. Conditions are provided under which allocations converge to the e¢ cient ones long enough after contracting, and this convergence occurs irrespective of the time the contract is initially agreed (put di§erently, the so-called "principle of vanishing distortions" introduced by Battaglini (2005) continues to apply irrespective of the buyerís arrival date).

Keywords: dynamic mechanism design; dynamic arrivals; stochastic process (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Date: 2017-06
New Economics Papers: this item is included in nep-cta, nep-des and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Journal Article: Dynamic mechanism design: Dynamic arrivals and changing values (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:31911

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