Dynamic Mechanism Design: A Myersonian Approach
We study mechanism design in dynamic quasilinear environments where private information arrives over time and decisions are made over multiple periods. We make three contributions. First, we provide a necessary condition for incentive compatibility that takes the form of an envelope formula for the...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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The Econometric Society
2015
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| Online Access: | http://hdl.handle.net/1721.1/96767 https://orcid.org/0000-0003-0400-5733 |
| _version_ | 1811082665595502592 |
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| author | Toikka, Juuso Pavan, Alessandro Segal, Ilya |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Toikka, Juuso Pavan, Alessandro Segal, Ilya |
| author_sort | Toikka, Juuso |
| collection | MIT |
| description | We study mechanism design in dynamic quasilinear environments where private information arrives over time and decisions are made over multiple periods. We make three contributions. First, we provide a necessary condition for incentive compatibility that takes the form of an envelope formula for the derivative of an agent's equilibrium expected payoff with respect to his current type. It combines the familiar marginal effect of types on payoffs with novel marginal effects of the current type on future ones that are captured by “impulse response functions.” The formula yields an expression for dynamic virtual surplus that is instrumental to the design of optimal mechanisms and to the study of distortions under such mechanisms. Second, we characterize the transfers that satisfy the envelope formula and establish a sense in which they are pinned down by the allocation rule (“revenue equivalence”). Third, we characterize perfect Bayesian equilibrium-implementable allocation rules in Markov environments, which yields tractable sufficient conditions that facilitate novel applications. We illustrate the results by applying them to the design of optimal mechanisms for the sale of experience goods (“bandit auctions”). |
| first_indexed | 2024-09-23T12:06:58Z |
| format | Article |
| id | mit-1721.1/96767 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T12:06:58Z |
| publishDate | 2015 |
| publisher | The Econometric Society |
| record_format | dspace |
| spelling | mit-1721.1/967672022-09-28T00:13:12Z Dynamic Mechanism Design: A Myersonian Approach Toikka, Juuso Pavan, Alessandro Segal, Ilya Massachusetts Institute of Technology. Department of Economics Toikka, Juuso Toikka, Juuso We study mechanism design in dynamic quasilinear environments where private information arrives over time and decisions are made over multiple periods. We make three contributions. First, we provide a necessary condition for incentive compatibility that takes the form of an envelope formula for the derivative of an agent's equilibrium expected payoff with respect to his current type. It combines the familiar marginal effect of types on payoffs with novel marginal effects of the current type on future ones that are captured by “impulse response functions.” The formula yields an expression for dynamic virtual surplus that is instrumental to the design of optimal mechanisms and to the study of distortions under such mechanisms. Second, we characterize the transfers that satisfy the envelope formula and establish a sense in which they are pinned down by the allocation rule (“revenue equivalence”). Third, we characterize perfect Bayesian equilibrium-implementable allocation rules in Markov environments, which yields tractable sufficient conditions that facilitate novel applications. We illustrate the results by applying them to the design of optimal mechanisms for the sale of experience goods (“bandit auctions”). 2015-04-23T19:59:33Z 2015-04-23T19:59:33Z 2014-03 2013-12 Article http://purl.org/eprint/type/JournalArticle 0012-9682 1468-0262 http://hdl.handle.net/1721.1/96767 Pavan, Alessandro, Ilya Segal, and Juuso Toikka. “Dynamic Mechanism Design: A Myersonian Approach.” Econometrica 82, no. 2 (2014): 601–653. https://orcid.org/0000-0003-0400-5733 en_US http://dx.doi.org/10.3982/ECTA10269 Econometrica Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf The Econometric Society Kate McNeill |
| spellingShingle | Toikka, Juuso Pavan, Alessandro Segal, Ilya Dynamic Mechanism Design: A Myersonian Approach |
| title | Dynamic Mechanism Design: A Myersonian Approach |
| title_full | Dynamic Mechanism Design: A Myersonian Approach |
| title_fullStr | Dynamic Mechanism Design: A Myersonian Approach |
| title_full_unstemmed | Dynamic Mechanism Design: A Myersonian Approach |
| title_short | Dynamic Mechanism Design: A Myersonian Approach |
| title_sort | dynamic mechanism design a myersonian approach |
| url | http://hdl.handle.net/1721.1/96767 https://orcid.org/0000-0003-0400-5733 |
| work_keys_str_mv | AT toikkajuuso dynamicmechanismdesignamyersonianapproach AT pavanalessandro dynamicmechanismdesignamyersonianapproach AT segalilya dynamicmechanismdesignamyersonianapproach |