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Multiple-Object Auctions with Budget Constrained Bidders

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  • Benoit, Jean-Pierre
  • Krishna, Vijay

Abstract

A seller with two objects faces a group of bidders who are subject to budget constraints. The objects have common values to all bidders but need not be identical, and may be either complements or substitutes. In a simple complete information setting we show: (1) if the objects are sold by means of a sequence of open ascending auctions, then it is always optimal to sell the more valuable object first; (2) the sequential auction yields more revenue than the simultaneous ascending auction used recently by the FCC if the discrepancy in the value is large, or if there are significant complementarities; (3) a hybrid simultaneous-sequential form is revenue superior to the sequential auction; and (4) budget constraints arise endogenously. Copyright 2001 by The Review of Economic Studies Limited

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Article provided by Wiley Blackwell in its journal Review of Economic Studies.

Volume (Year): 68 (2001)
Issue (Month): 1 (January)
Pages: 155-79

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Handle: RePEc:bla:restud:v:68:y:2001:i:1:p:155-79

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  1. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August.
  2. Che, Yeon-Koo & Gale, Ian, 1998. "Standard Auctions with Financially Constrained Bidders," Review of Economic Studies, Wiley Blackwell, vol. 65(1), pages 1-21, January.
  3. John McMillan, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-162, Summer.
  4. Peter Cramton, 1997. "The FCC Spectrum Auctions: An Early Assessment," Papers of Peter Cramton 97jemsfcc, University of Maryland, Department of Economics - Peter Cramton, revised 12 Jul 1998.
  5. David J. Salant, 1997. "Up in the Air: GTE's Experience in the MTA Auction for Personal Communication Services Licenses," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 549-572, 09.
  6. Lawrence M. Ausubel & Peter Cramton & R. Preston McAfee & John McMillan, 1998. "Synergies in Wireless Telephony: Evidence from the Broadband PCS Auctions," Papers of Peter Cramton 97jems, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
  7. Carolyn Pitchik & Andrew Schotter, 1988. "Perfect Equilibria in Budget-Constrained Sequential Auctions: An Experimental Study," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 363-388, Autumn.
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