Efficient Actions in Dynamic Auction Environment

Опубликовано 6 сентября 2016, 6:07

We model an environment, where bidders private values may change over time as a result of both costly private actions and exogenous shocks. Examples of private actions include investment and entry decisions; shocks might be due to exogenous changes in a potential buyer's circumstances. We describe an efficient auction mechanism that maximizes the final value of the object to the winning bidder net of the total cost of investment by all agents. In particular, we show that costly signaling is necessary for efficient entry when agents receive private information both before and after they make the entry decision. To rule out pooling equilibria that coexist with the efficient equilibrium in the basic mechanism, we introduce a virtual implementation-style mechanism that (i) is almost efficient; (ii) forces players to coordinate on the separating equilibrium; and (iii) is simple enough to be potentially useful in practice.   Link to the paper rwj.berkeley.edu/schwarz/publi...