Dynamic Mechanism Collapse: A Boundary Characterization

Xiaopeng Zeng, Erbao Cao and Xiangqian Yang

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Abstract: When are dynamics valuable? In Bayesian environments with public signals and no intertemporal commitment, we study a seller who allocates an economically single-shot resource over time. We provide necessary and sufficient conditions under which the optimal dynamic mechanism collapses to a simple terminal design: a single public experiment at date 0 followed by a posterior-dependent static mechanism executed at a deterministic date, with no further disclosure. The key condition is the existence of a global affine shadow value that supports the posterior-based revenue frontier and uniformly bounds all history-dependent revenues. When this condition fails, a collapse statistic pinpoints the dates and public state variables that generate genuine dynamic value. The characterization combines martingale concavification on the belief space with an affine-support duality for concave envelopes.

Date: 2025-11, Revised 2025-11
New Economics Papers: this item is included in nep-des and nep-mic
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