The Inefficiency of Auctions in Dynamic Stochastic Environments

Dale Stahl

CARE Working Papers from The University of Texas at Austin, Center for Applied Research in Economics

Abstract: First and second price auctions are optimal mechanisms for resource allocation in many situations and are used widely. However, unlike the static once-and-for-all situations for which auctions are efficient, in dynamic stochastic environments auctions cannot necessarily support opimal allocations. The potential inefficiency of auctions is demonstrated by example. A computer server is modeled as an M/M/1 system, with heterogeneous users. The optimal allocation of jobs is derived, and it is shown that this allocation cannot be supported as either a first-price or a second-price auction equilibrium.

Pages: 26 pages
Date: 1997-06
Note: None
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:tex:carewp:9709

Access Statistics for this paper

More papers in CARE Working Papers from The University of Texas at Austin, Center for Applied Research in Economics Contact information at EDIRC.
Bibliographic data for series maintained by Caroline Thomas ().