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Optimal Auctions for Asymmetrically Budget Constrained Bidders

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Author Info
Alexey Malakhov
Rakesh V. Vohra
Abstract

We consider an environment with a single divisible good and two bidders. The valuations of the bidders are private information but one bidder has a commonly known budget constraint. For this environment we derive the revenue maximizing subsidy free incentive compatible auction. We also examine the case when the budget constraint is private information but bidders must post a bond.

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File URL: http://www.kellogg.northwestern.edu/research/math/papers/1419.pdf
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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1419.

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Date of creation: Dec 2005
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Handle: RePEc:nwu:cmsems:1419

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  1. Zheng, Charles Z., 2001. "High Bids and Broke Winners," Journal of Economic Theory, Elsevier, vol. 100(1), pages 129-171, September. [Downloadable!] (restricted)
  2. Arieh Gavious & Benny Moldovanu & Aner Sela, 2002. "Bid Costs and Endogenous Bid Caps," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 709-722, Winter.
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  3. Harris, Milton & Raviv, Artur, 1981. "A Theory of Monopoly Pricing Schemes with Demand Uncertainty," American Economic Review, American Economic Association, vol. 71(3), pages 347-65, June.
  4. Laffont, Jean-Jacques & Robert, Jacques, 1996. "Optimal auction with financially constrained buyers," Economics Letters, Elsevier, vol. 52(2), pages 181-186, August. [Downloadable!] (restricted)
  5. Che, Yeon-Koo & Gale, Ian, 2000. "The Optimal Mechanism for Selling to a Budget-Constrained Buyer," Journal of Economic Theory, Elsevier, vol. 92(2), pages 198-233, June. [Downloadable!] (restricted)
  6. Che, Yeon-Koo & Gale, Ian, 1996. "Expected revenue of all-pay auctions and first-price sealed-bid auctions with budget constraints," Economics Letters, Elsevier, vol. 50(3), pages 373-379, March. [Downloadable!] (restricted)
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