When to sell an indivisible object: Optimal timing with Markovian buyers

TL;DR

This paper investigates the optimal timing for selling an indivisible object to Markovian buyers, formulating it as a dynamic mechanism design problem and providing a method to identify the optimal solution and incentive compatibility.

Contribution

It introduces a novel dynamic mechanism design framework for optimal selling timing with evolving buyer valuations and offers a procedure to determine the optimal selling strategy.

Findings

Provides a procedure for finding the optimal selling strategy.

Shows how to verify incentive compatibility.

Connects the problem to optimal stopping theory.

Abstract

We study the problem of when to sell an indivisible object. There is a monopolistic seller who owns an indivisible object and plans to sell it over a given span of time to the set of potential buyers whose valuations for the object evolve over time. We formulate the seller's problem as a dynamic mechanism design problem. We provide a procedure for finding the optimal solution and show how to check incentive compatibility. We also discuss the threshold rule from the perspective of optimal stopping.