Optimal and efficient mechanisms with asymmetrically budget constrained buyers

Alexei Boulatov and Sergei Severinov

Games and Economic Behavior, 2021, vol. 127, issue C, 155-178

Abstract: The paper characterizes the optimal (revenue-maximizing) mechanism for allocating a good to buyers who face asymmetric budget constraints. The optimal mechanism belongs to one of two classes. When the budget differences between the buyers are small, the mechanism discriminates only between high-valuation types for whom the budget constraint is binding. All low valuations buyers are treated symmetrically despite budget differences. When budget differences are sufficiently large, the mechanism discriminates in favor of buyers with small budgets when the valuations are low, and in favor of buyers with larger budgets when the valuations are high. We also provide a characterization of the constrained-efficient (surplus maximizing) mechanism and demonstrate that it shares the above properties of the optimal mechanism.

Keywords: Mechanism Design; Optimal and efficient mechanisms; Auctions; Asymmetric budget constraints (search for similar items in EconPapers)
JEL-codes: D44 D82 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:127:y:2021:i:c:p:155-178

DOI: 10.1016/j.geb.2021.02.001

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