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Media type:
E-Article
Title:
Optimal Dynamic Mechanism Design and the Virtual-Pivot Mechanism
Contributor:
Kakade, Sham M.;
Lobel, Ilan;
Nazerzadeh, Hamid
Published:
Institute for Operations Research and the Management Sciences (INFORMS), 2013
Published in:
Operations Research, 61 (2013) 4, Seite 837-854
Language:
English
DOI:
10.1287/opre.2013.1194
ISSN:
0030-364X;
1526-5463
Origination:
Footnote:
Description:
We consider the problem of designing optimal mechanisms for settings where agents have dynamic private information. We present the virtual-pivot mechanism, which is optimal in a large class of environments that satisfy a separability condition. The mechanism satisfies a rather strong equilibrium notion (it is periodic ex post incentive compatible and individually rational). We provide both necessary and sufficient conditions for immediate incentive compatibility for mechanisms that satisfy periodic ex post incentive compatibility in future periods. The result also yields a strikingly simple mechanism for selling a sequence of items to a single buyer. We also show that the allocation rule of the virtual-pivot mechanism has a very simple structure (a virtual index) in multiarmed bandit settings. Finally, we show through examples that the relaxation technique we use does not produce optimal dynamic mechanisms in general nonseparable environments.