Dynamic Mechanism Design: An Introduction

52 Pages Posted: 29 Aug 2017

See all articles by Dirk Bergemann

Dirk Bergemann

Yale University - Cowles Foundation - Department of Economics; Yale University - Cowles Foundation

juuso valimaki

Aalto University

Multiple version iconThere are 3 versions of this paper

Date Written: August 2017

Abstract

We provide an introduction into the recent developments of dynamic mechanism design with a primary focus on the quasilinear case. First, we describe socially optimal (or efficient) dynamic mechanisms. These mechanisms extend the well known Vickrey-Clark-Groves and D'Aspremont-GĂ©rard-Varet mechanisms to a dynamic environment. Second, we discuss results on revenue optimal mechanism. We cover models of sequential screening and revenue maximizing auctions with dynamically changing bidder types. We also discuss models of information management where the mechanism designer can control (at least partially) the stochastic process governing the agent's types. Third, we consider models with changing populations of agents over time. This allows us to address new issues relating to the properties of payment rules. After discussing related models with risk-averse agents, limited liability, and different performance criteria for the mechanisms, we conclude by discussing a number of open questions and challenges that remain for the theory of dynamic mechanism design.

Keywords: Bandit Auctions, Dynamic Mechanism Design, Dynamic Pivot Mechanism, Information Management, Sequential Screening

JEL Classification: D44, D82, D83

Suggested Citation

Bergemann, Dirk and valimaki, juuso, Dynamic Mechanism Design: An Introduction (August 2017). CEPR Discussion Paper No. DP12240. Available at SSRN: https://ssrn.com/abstract=3028606

Dirk Bergemann (Contact Author)

Yale University - Cowles Foundation - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States
203-432-3592 (Phone)
203-432-2128 (Fax)

HOME PAGE: http://www.econ.yale.edu/~dirk/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Juuso Valimaki

Aalto University

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