Auction design and order of sale with budget-constrained bidders

Ulrich Bergmann () and Arkady Konovalov ()
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Ulrich Bergmann: University of Zurich
Arkady Konovalov: University of Zurich

Experimental Economics, 2024, vol. 27, issue 1, No 3, 36-57

Abstract: Abstract The presence of financial constraints changes traditional auction theory predictions. In the case of multiple items, such constraints may affect revenue equivalence and efficiency of different auction formats. We consider a simple complete information setting with three financially constrained bidders and two items that have different values common to all the bidders. Using a laboratory experiment, we find that, as predicted by theory, it is more beneficial for the seller to sell the higher value item first. We then show that the first-price sealed-bid auction yields higher revenue than the English auction, with significant differences in learning of equilibrium strategies.

Keywords: Auction; Budget constraints; English auction; First price auction; Experiment (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10683-023-09812-y

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