Competitive and revenue-optimal pricing with budgets

Simon Finster (), Paul W. Goldberg () and Edwin Lock ()
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Simon Finster: Department of Statistics, CREST, and Inria/FairPlay Now
Paul W. Goldberg: Department of Computer Science, University of Oxford
Edwin Lock: Departments of Computer Science and Economics, University of Oxford

Theoretical Economics, Forthcoming

Abstract: In markets with budget-constrained buyers, competitive equilibria need not be efficient in the utilitarian sense, or maximise the seller's revenue. We consider a setting with multiple divisible goods. Competitive equilibrium outcomes, and only those, are constrained utilitarian efficient, a notion of utilitarian efficiency that respects buyers' demands and budgets. Our main contribution establishes that, when buyers have linear valuations, competitive equilibrium prices are unique and revenue-optimal for a zero-cost seller.

Keywords: Competitive equilibrium; revenue maximisation; efficiency; market design; budget constraints; Fisher market; product-mix auction; arctic auction (search for similar items in EconPapers)
JEL-codes: D40 D44 D50 (search for similar items in EconPapers)
Date: 2025-04-10
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