Efficient investment in a dynamic auction environment
Michael Schwarz and
Konstantin Sonin ()
Games and Economic Behavior, 2012, vol. 75, issue 1, 104-119
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)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:75:y:2012:i:1:p:104-119
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