Auctions with Dynamic Costly Information Acquisition
54 Pages Posted: 2 Jun 2014 Last revised: 26 Apr 2016
Date Written: December 20, 2013
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: Suggested Citation