Auctions with dynamic populations: Efficiency and revenue maximization

Abstract

We study a stochastic sequential allocation problem with a dynamic population of privately-informed buyers.We characterize the set of efficient allocation rules and show that a dynamic VCG mechanism is both efficient and periodic ex post incentive compatible; we also show that the revenue-maximizing direct mechanism is a pivot mechanism with a reserve price. We then consider sequential ascending auctions in this setting, both with and without a reserve price. We construct equilibrium bidding strategies in this indirect mechanism where bidders reveal their private information in every period, yielding the same outcomes as the direct mechanisms. Thus, the sequential ascending auction is a natural institution for achieving either efficient or optimal outcomes. © 2009 ICST Institute for Computer Sciences, Social-Informatics and Telecommunications Engineering.