The Dynamic Pivot Mechanism

Dirk Bergemann and Juuso Välimäki

No 1672R, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We consider truthful implementation of the socially efficient allocation in an independent private-value environment in which agents receive private information over time. We propose a suitable generalization of the pivot mechanism, based on the marginal contribution of each agent. In the dynamic pivot mechanism, the ex-post incentive and ex-post participation constraints are satisfied for all agents after all histories. In an environment with diverse preferences it is the unique mechanism satisfying ex-post incentive, ex-post participation and efficient exit conditions. We develop the dynamic pivot mechanism in detail for a repeated auction of a single object in which each bidder learns over time her true valuation of the object. The dynamic pivot mechanism here is equivalent to a modified second price auction.

Keywords: Pivot mechanisms; Dynamic mechanism design; Ex-post equilibrium; Marginal contribution; Multi-armed bandit; Bayesian learning (search for similar items in EconPapers)
JEL-codes: C72 C73 D43 D83 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2008-08, Revised 2009-12
Note: CFP 1293, includes supplement
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Econometrica (March 2010), 78(2): 771-789

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Related works:
Journal Article: The Dynamic Pivot Mechanism (2010)
Working Paper: The Dynamic Pivot Mechanism (2008)
Working Paper: The Dynamic Pivot Mechanism (2008)
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