hero working papers

Becoming the Neighbor Bidder: Endogenous Winner's Curse in Dynamic Mechanisms

Number: 501
Year: 2013
Author(s): Alejandro Francetich
This paper addresses the problem of sequentially allocating timesensitive goods, or one-period leases on a durable good, among agents who compete through time and learn about the common component of the value of the allocation through experience. I show that efficiency is unattainable, and I identify simple variations of sequential second-price or English auctions that implement the second best and the revenuemaximizing auction. When the units are divisible, I also identify the corresponding auctions that allow for double sourcing.

Keywords: Dynamic mechanism design, sequential auctions, interdependent values, multi-dimensional types, winner's curse, double sourcing
JEL codes: D82, D86