Dynamic price sequence and incentive compatibility (extended abstract)

We introduce and study a new auction model in which a certain type of goods is offered over a period of time, and buyers arrive at different times and stay until a common deadline (unless their purchase requests have been fulfilled). We examine in this model incentive compatible auction protocols (i.e., those that induce participants to bid their true valuations). We establish an interesting connection between incentive compatibility and price sequence: incentive compatibility forces a non-decreasing price sequence under some assumptions on market pricing schemes. We should point out that negation of our assumptions would require market distortions to some extent. Our protocol may not ensure that one item must be sold everyday. Imposing such a market intervention, we show an impossibility result that deterministic incentive compatible auction protocols do not exist. With randomized relaxation, we give such an incentive compatible auction protocol. We also discuss incentive compatible protocols under other market conditions.