An Ascending Multi-Item Auction with Financially Constrained Bidders
AbstractA 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 11/04.
Date of creation: Feb 2011
Date of revision:
Contact details of provider:
Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
Phone: (0)1904 323776
Fax: (0)1904 323759
Web page: http://www.york.ac.uk/economics/
More information through EDIRC
Ascending auction; Financial constraint; Equilibrium under allotment.;
Other versions of this item:
- Gerard van der Laan & Zaifu Yang, 2008. "An Ascending Multi-Item Auction with Financially Constrained Bidders," Tinbergen Institute Discussion Papers 08-017/1, Tinbergen Institute.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-12 (All new papers)
- NEP-CTA-2011-02-12 (Contract Theory & Applications)
- NEP-GTH-2011-02-12 (Game Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tjalling C. Koopmans & Martin J. Beckmann, 1955. "Assignment Problems and the Location of Economic Activities," Cowles Foundation Discussion Papers 4, Cowles Foundation for Research in Economics, Yale University.
- Mishra, D. & Talman, A.J.J., 2006.
"Overdemand and Underdemand in Economies with Indivisible Goods and Unit Demands,"
2006-84, Tilburg University, Center for Economic Research.
- Debasis Mishra & Dolf Talman, 2007. "Overdemand and underdemand in economies with indivisible goods and unit demand," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 07-03, Indian Statistical Institute, New Delhi, India.
- Ning Sun & Zaifu Yang, 2009. "A Double-Track Adjustment Process for Discrete Markets With Substitutes and Complements," Econometrica, Econometric Society, vol. 77(3), pages 933-952, 05.
- Crawford, Vincent P & Knoer, Elsie Marie, 1981. "Job Matching with Heterogeneous Firms and Workers," Econometrica, Econometric Society, vol. 49(2), pages 437-50, March.
- Herings, P. Jean-Jacques & Konovalov, Alexander, 2009.
"Constrained suboptimality when prices are non-competitive,"
Open Access publications from Maastricht University
urn:nbn:nl:ui:27-22852, Maastricht University.
- Herings, P. Jean-Jacques & Konovalov, Alexander, 2009. "Constrained suboptimality when prices are non-competitive," Journal of Mathematical Economics, Elsevier, vol. 45(1-2), pages 43-58, January.
- Herings,P. Jean-Jacques & Konovalov,Alexander, 2002. "Constrained Suboptimality when Prices Are Non-competitive," Research Memoranda 012, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
- Herings,P. Jean-Jacques & Konovalov,Alexander, 2000. "Constrained Suboptimality when Prices Are Non-competitive," Research Memoranda 012, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
- Herings, P.J.J. & Konovalov, A., 2000. "Constrained Suboptimality When Prices are Non-Competitive," Discussion Paper 2000-114, Tilburg University, Center for Economic Research.
- Sandro Brusco & Giuseppe Lopomo, 2008. "BUDGET CONSTRAINTS AND DEMAND REDUCTION IN SIMULTANEOUS ASCENDING-BID AUCTIONS -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 56(1), pages 113-142, 03.
- Maskin, Eric S., 2000. "Auctions, development, and privatization: Efficient auctions with liquidity-constrained buyers," European Economic Review, Elsevier, vol. 44(4-6), pages 667-681, May.
- Sandro Brusco & Giuseppe Lopomo, 2005.
"Simultaneous Ascending Auctions with Complementarities and Known Budget Constraints,"
Department of Economics Working Papers
05-13, Stony Brook University, Department of Economics.
- Sandro Brusco & Giuseppe Lopomo, 2009. "Simultaneous ascending auctions with complementarities and known budget constraints," Economic Theory, Springer, vol. 38(1), pages 105-124, January.
- van der Laan, Gerard, 1980. "Equilibrium under Rigid Prices with Compensation for the consumers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 63-73, February.
- Azariadis, Costas & Stiglitz, Joseph E, 1983. "Implicit Contracts and Fixed Price Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 1-22, Supplemen.
- Talman, A.J.J. & Yang, Z.F., 2007.
"A Dynamic Auction for Differentiated Items under Price Rigidities,"
2007-26, Tilburg University, Center for Economic Research.
- Talman, Dolf & Yang, Zaifu, 2008. "A dynamic auction for differentiated items under price rigidities," Economics Letters, Elsevier, vol. 99(2), pages 278-281, May.
- Laffont, Jean-Jacques & Robert, Jacques, 1996. "Optimal auction with financially constrained buyers," Economics Letters, Elsevier, vol. 52(2), pages 181-186, August.
- 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.
- 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.
- 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.
- Pitchik, Carolyn & Schotter, Andrew, 1986. "Budget Constrained Sequential Auctions," Working Papers 86-21, C.V. Starr Center for Applied Economics, New York University.
- Marilda Sotomayor, 2002. "A Simultaneous Descending Bid Auction for Multiple Items and Unitary Demand," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 56(3), pages 497-510, July.
- Paul Klemperer, 2004.
"Auctions: Theory and Practice,"
2004-W09, Economics Group, Nuffield College, University of Oxford.
- Demange, Gabrielle & Gale, David & Sotomayor, Marilda, 1986. "Multi-Item Auctions," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 863-72, August.
- Cox, Charles C, 1980. "The Enforcement of Public Price Controls," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 887-916, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Hodgson).
If references are entirely missing, you can add them using this form.