COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1584 Efficient Dynamic Auctions Dirk Bergemann and Juuso Välimäki October 2006 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. JEL Classification: C72, C73, D43, D83 Keywords: Vickrey Auction, Marginal Contribution, Dynamic Allocation Index, Multi-Armed Bandit, Bayesian Learning, Experimentation, Matching |
