CFDP 2102R

Author(s): Dirk BergemannJuuso Välimäki

Publication Date: August 2017

Revision Date: June 2018

Pages: 61

Abstract: 

We provide an introduction to the recent developments in dynamic mechanism design, with a primary focus on the quasilinear case. First, we describe socially optimal (or efficient) dynamic mechanisms. These mechanisms extend the well-known Vickrey-Clark-Groves and D’Aspremont-Gérard-Varet mechanisms to a dynamic environment. Second, we discuss revenue optimal mechanisms. We cover models of sequential screening and revenue maximizing auctions with dynamically changing bidder types. We also discuss models of information management where the mechanism designer can control (at least partially) the stochastic process governing the agents’ types. Third, we consider models with changing populations of agents over time. After discussing related models with risk-averse agents and limited liability, we conclude with a number of open questions and challenges that remain for the theory of dynamic mechanism design.

Keywords: 

Dynamic Mechanism Design, Sequential Screening, Dynamic Pivot Mechanism, Bandit Auctions, Information Management, Dynamic Pricing

JEL Classification Codes: D44, D82, D83

JEL Classification Codes: D44D82D83