Dynamic Mechanism Design with Overbooking, Different Deadlines, and Multi-unit Demands

Abstract

This paper considers a dynamic mechanism design in which multiple objects with different consumption deadlines are allocated over time. Agents arrive over time and may have multi-unit demand. We characterize necessary and sufficient condition for periodic ex-post incentive compatibility and provide the optimal mechanism that maximizes the seller's expected revenue under regularity conditions. When complete contingent-contracts are available, the optimal mechanism can be interpreted as an "overbooking" mechanism. The seller utilizes overbooking for screening and price-discriminating advance agents. When agents demand multiple objects as complements, the seller may face a tradeoff between the last-minute price of the current object and the future profit. Keywords: dynamic mechanism design, optimal auction, overbooking, price discrimination, revenue management.