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Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

Dynamic Mechanism Design: An Elementary Introduction

Vol.32, No.2, June , 92–121



  •   (Korea University)

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Abstract  

This paper introduces dynamic mechanism design in an elementary fashion. We first examine optimal dynamic mechanisms: We find necessary and sufficient conditions for perfect Bayesian incentive compatibility and formulate the optimal dynamic mechanism problem. We next examine efficient dynamic mechanisms: We establish the uniqueness of Groves mechanism and investigate budget balance of the dynamic pivot mechanism in some detail for a bilateral trading environment. This introduction reveals that many results and techniques of static mechanism design can be straightforwardly extended and adapted to the analysis of dynamic settings.


Keywords
   Optimal Mechanism, Efficient Mechanism, Markov Process, Incentive Compatibility, Budget Balance

JEL classification codes
   C73, D47, D82
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