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An Efficient Dynamic Mechanism with Covert Information Acquisition

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  • Vitali Gretschko
  • Jasmina Simon

Abstract

We examine a setting of independent private value auctions where bidders can covertly acquire gradual information about their valuations. We demonstrate that a dynamic pivot mechanism implements the first-best information acquisition and allocation rule. We apply our results to a commonly used model of auctions with information acquisition. The bidders are symmetric and information acquisition costs are moderate. Our analysis shows that the Dutch auction achieves near‐efficiency. That is, the welfare loss is bounded by the information acquisition cost of a single bidder. In contrast, the English auction may result in greater welfare losses.

Suggested Citation

  • Vitali Gretschko & Jasmina Simon, 2024. "An Efficient Dynamic Mechanism with Covert Information Acquisition," CRC TR 224 Discussion Paper Series crctr224_2024_616, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2024_616
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp616
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    References listed on IDEAS

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    1. Hausch, Donald B & Li, Lode, 1993. "A Common Value Auction Model with Endogenous Entry and Information Acquisition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 315-334, April.
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    4. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-1575, September.
    5. Shi, Xianwen, 2012. "Optimal auctions with information acquisition," Games and Economic Behavior, Elsevier, vol. 74(2), pages 666-686.
    6. Dirk Bergemann & Juuso V‰lim‰ki, 2010. "The Dynamic Pivot Mechanism," Econometrica, Econometric Society, vol. 78(2), pages 771-789, March.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Information acquisition; dynamic auctions; dynamic pivot mechanism;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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