BUDGET CONSTRAINTS AND DEMAND REDUCTION IN SIMULTANEOUS ASCENDING‐BID AUCTIONS*

Sandro Brusco and Giuseppe (Pino) Lopomo

Journal of Industrial Economics, 2008, vol. 56, issue 1, 113-142

Abstract: The possibility, even if arbitrarily small, of binding budget constraints in simultaneous ascending bid auctions induces strategic demand reduction and generates significant inefficiencies. Under mild conditions on the distributions of the bidders' values, unconstrained bidders behave as if they were liquidity constrained, even as the probability that bidders are budget constrained goes to zero.

Date: 2008
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