 Asymmetric budget constraints in a first-price auctionJournal of Economic Theory, 2020, vol. 186, issue C Abstract: I solve a first-price auction for two bidders with asymmetric budget distributions and known valuations for one object. I show that in any equilibrium, the expected utilities and bid distributions of both bidders are unique. If budgets are sufficiently low, the bidders will bid their entire budget in any equilibrium. For sufficiently high budgets, mass points in the equilibrium strategies arise. A less restrictive budget distribution could make both bidders strictly worse off. If the budget distribution of one bidder is dominated by the budget distribution of the other bidder in the reverse-hazard-rate order, the weaker bidder will bid more aggressively than the stronger bidder. In contrast to existing results for symmetric budget distributions, with asymmetric budget distributions, a second-price auction can yield a strictly higher revenue than a first-price auction. Under an additional assumption, I derive the unique equilibrium utilities and bid distributions of both bidders in an all-pay auction. Keywords: Budget constraints; Asymmetric bidders; First-price auctions; All-pay auctions (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:186:y:2020:i:c:s0022053119301231 DOI: 10.1016/j.jet.2019.104975 Access Statistics for this article Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell More articles in Journal of Economic Theory from Elsevier |
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