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Garrett, Daniel F. (2017) Dynamic Mechanism Design: Dynamic Arrivals and Changing Values. TSE Working Paper, n. 17-830, Toulouse
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Abstract
We study the optimal mechanism in a dynamic sales relationship where the buyerís arrival date is uncertain, and where his value changes stochastically over time. The buyerís arrival date is the Örst date at which contracting is feasible and is his private information. To induce immediate participation, the buyer is granted positive expected rents even if his value at arrival is the lowest possible. The buyer is punished for arriving late; i.e., he expects to earn less of the surplus. Optimal allocations for a late arriver are also further distorted below Örst-best levels. Conditions are provided under which allocations converge to the e¢ cient ones long enough after contracting, and this convergence occurs irrespective of the time the contract is initially agreed (put di§erently, the so-called "principle of vanishing distortions" introduced by Battaglini (2005) continues to apply irrespective of the buyerís arrival date).
| Item Type: | Monograph (Working Paper) |
|---|---|
| Sub-title: | Dynamic Arrivals and Changing Values |
| Language: | English |
| Date: | June 2017 |
| Place of Publication: | Toulouse |
| Uncontrolled Keywords: | dynamic mechanism design, dynamic arrivals, stochastic process |
| JEL Classification: | D82 - Asymmetric and Private Information |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Institution: | Université Toulouse 1 Capitole |
| Site: | UT1 |
| Date Deposited: | 16 Apr 2018 15:14 |
| Last Modified: | 16 Apr 2018 15:14 |
| OAI Identifier: | oai:tse-fr.eu:31911 |
| URI: | https://publications.ut-capitole.fr/id/eprint/25640 |
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