Auctions with Dynamic Costly Information Acquisition

54 Pages Posted: 2 Jun 2014 Last revised: 26 Apr 2016

Negin Golrezaei

University of Southern California - Marshall School of Business

Hamid Nazerzadeh

University of Southern California - Marshall School of Business

Date Written: December 20, 2013

Abstract

We study the mechanism design problem for a seller of an indivisible good in a setting where privately informed buyers can acquire additional information and refine their valuations for the good at a cost. For this setting, we propose optimal (revenue-maximizing) and efficient (welfare-maximizing) mechanisms that induce a right level of investment in information acquisition.

We show that because information is costly, in the optimal and even the efficient mechanisms, not all the buyers would obtain the additional information. In fact, these mechanisms incentivize buyers with higher initial valuations to acquire information.

Keywords: dynamic mechanisms, optimal auctions, online advertising, cookie matching, data markets, selling information

JEL Classification: D44

Suggested Citation

Golrezaei, Negin and Nazerzadeh, Hamid, Auctions with Dynamic Costly Information Acquisition (December 20, 2013). Available at SSRN: https://ssrn.com/abstract=2444429 or http://dx.doi.org/10.2139/ssrn.2444429

Negin Golrezaei

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

Hamid Nazerzadeh (Contact Author)

University of Southern California - Marshall School of Business ( email )

Bridge Memorial Hall
Los Angeles, CA 90089
United States

HOME PAGE: http://www-bcf.usc.edu/~nazerzad/

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