Efficient Dynamic Auctions
17 Pages Posted: 11 Oct 2006
Date Written: October 2006
Abstract
We consider the truthful implementation of the socially efficient allocation in a dynamic private value environment in which agents receive private information over time. We show that a suitable generalization of the Vickrey-Clark-Groves mechanism, based on the marginal contribution of each agent, leads to truthtelling in every period.
A leading example of a dynamic allocation model is the sequential auction of a single good in which the current winner of the object receives additional information about her valuation. We show that a modified sequential second price auction in which only the current winner makes a positive payment leads to truthtelling. In general allocation problems, the marginal contribution mechanism continues to induce truthtelling in every period but may now include positive transfers for many agents.
Keywords: Vickrey Auction, Marginal Contribution, Dynamic Allocation Index, Multi-Armed Bandit, Bayesian Learning, Experimentation, Matching
JEL Classification: C72, C73, D43, D83
Suggested Citation: Suggested Citation
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