Non-Clairvoyant Dynamic Mechanism Design
61 Pages Posted: 23 Nov 2016 Last revised: 2 Nov 2018
Date Written: October 13, 2018
Despite their better revenue and welfare guarantees for repeated auctions, dynamic mechanisms have not been widely adopted in practice. This is partly due to the complexity of their implementation as well as their unrealistic use of forecasting for future periods. We address these shortcomings and present a new family of dynamic mechanisms that are simple and require no distributional knowledge of future periods.
This paper introduces the concept of non-clairvoyance in dynamic mechanism design, which is a measure-theoretic restriction on the information that the seller is allowed to use. A dynamic mechanism is non-clairvoyant if the allocation and pricing rule at each period does not depend on the type distributions in the future periods.
We develop a framework (bank account mechanisms) for characterizing, designing, and proving lower bounds for dynamic mechanisms (clairvoyant or non-clairvoyant). This framework is used to characterize the revenue extraction power of the non-clairvoyant mechanisms with respect to the mechanisms that are allowed unrestricted use of distributional knowledge.
Keywords: Dynamic Mechanism Design, Bank Account Mechanisms, Non-Clairvoyance, Dynamic Auctions, Approximations, Internet Advertising
JEL Classification: D44, C73, D82
Suggested Citation: Suggested Citation