An Ascending Multi-Item Auction with Financially Constrained Bidders

Gerard van der Laan and Zaifu Yang

Discussion Papers from Department of Economics, University of York

Abstract: A number of heterogeneous items are to be sold to a group of potential bidders. Every bidder knows his own values over the items and his own budget privately. Due to budget constraint, bidders may not be able to pay up to their values. In such a market, a Walrasian equilibrium typically fails to exist and furthermore no existing allocation mechanism can tackle this case. We propose the notion of an `equilibrium under allotment' to such markets and develop an ascending auction mechanism that always finds such an equilibrium assignment and corresponding price system in finitely many rounds. The auction can be viewed as an appropriate and proper generalization of the ascending auction of Demange, Gale and Sotomayor from settings without financial constraints to settings with financial constraints. We examine various properties of the auction and its outcome.

Keywords: Ascending auction; Financial constraint; Equilibrium under allotment. (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
Date: 2011-02
New Economics Papers: this item is included in nep-cta and nep-gth
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Related works:
Journal Article: An ascending multi-item auction with financially constrained bidders (2016)
Working Paper: An Ascending Multi-Item Auction with Financially Constrained Bidders (2008)
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