An Efficient Dynamic Mechanism With Covert Information Acquisition

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 rst-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-eciency. 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.

Gretschko, Vitali and Jasmina Simon (2024), An Efficient Dynamic Mechanism With Covert Information Acquisition, ZEW Discussion Paper No. 24-081, Mannheim.