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An Ascending Multi-Item Auction with Financially Constrained Bidders

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  • Gerard van der Laan
  • Zaifu Yang

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.

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Bibliographic Info

Paper provided by Department of Economics, University of York in its series Discussion Papers with number 11/04.

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Date of creation: Feb 2011
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Handle: RePEc:yor:yorken:11/04

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Keywords: Ascending auction; Financial constraint; Equilibrium under allotment.;

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  1. Benoit, Jean-Pierre & Krishna, Vijay, 2001. "Multiple-Object Auctions with Budget Constrained Bidders," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 68(1), pages 155-79, January.
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Cited by:
  1. Andersson , Tommy & Yang , Zaifu & Zhang , Dongmo, 2014. "How to Efficiently Allocate Houses under Price Controls?," Working Papers 2014:24, Lund University, Department of Economics.

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