An ascending multi-item auction with financially constrained bidders

Gerard van der Laan and Zaifu Yang

The Journal of Mechanism and Institution Design, 2016, vol. 1, issue 1, 109-149

Abstract: Several heterogeneous items are to be sold to a group of potentially budget- constrained bidders. Every bidder has private knowledge of his own valuation of the items and his own budget. Due to budget constraints, bidders may not be able to pay up to their values and typically no Walrasian equilibrium exists. To deal with such markets, we propose the notion of 'equilibrium under allotment' and develop an ascending auction mechanism that always finds such an equilibrium assignment and a corresponding system of prices in finite time. The auction can be viewed as a novel generalization of the ascending auction of Demange et al. (1986) from settings without financial constraints to settings with financial constraints. We examine various strategic and efficiency properties of the auction and its outcome.

Keywords: Ascending auction; budget constraint; equilibrium under allotment. (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:jmi:articl:jmi-v1i1a4

DOI: 10.22574/jmid.2016.12.004

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