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Efficient investment in a dynamic auction environment

Brendan Daley, Michael Schwarz and Konstantin Sonin ()

Games and Economic Behavior, 2012, vol. 75, issue 1, 104-119

Abstract: We analyze an environment in which biddersʼ private values change over time due to both private investments and exogenous shocks. We demonstrate that a highly-decentralized mechanism achieves efficiency. The mechanism requires a stage of costly public announcements (i.e., signaling) to induce efficient investment. For this reason, an equilibrium selection issue arises, but can be handled by a minor modification in the spirit of virtual implementation.

Keywords: Auctions; Efficient mechanism design; Signaling (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
Date: 2012
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