The Simplicity of Optimal Dynamic Mechanisms

Jose Correa, Andres Cristi and Laura Vargas Koch

Papers from arXiv.org

Abstract: A fundamental economic question is that of designing revenue-maximizing mechanisms in dynamic environments. This paper considers a simple yet compelling market model to tackle this question, where forward-looking buyers arrive at the market over discrete time periods, and a monopolistic seller is endowed with a limited supply of a single good. In the case of i.i.d. and regular valuations for the buyers, Board and Skrzypacz (2016) characterized the optimal mechanism and proved the optimality of posted prices in the continuous-time limit. Our main result considers the limit case of a continuum of buyers, establishing that for arbitrary independent buyers' valuations, posted prices and capacity rationing can implement the optimal anonymous mechanism. Our result departs from the literature in three ways: It does not make any regularity assumptions, it considers the case of general, not necessarily i.i.d., arrivals, and finally, not only posted prices but also capacity rationing takes part in the optimal mechanism. Additionally, if supply is unlimited, we show that the rationing effect vanishes, and the optimal mechanism can be implemented using posted prices only, \`a la Board (2008).

Date: 2024-10
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:

Downloads: (external link)
http://arxiv.org/pdf/2410.11738 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2410.11738

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators (help@arxiv.org).