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An Efficient Multi-Item Dynamic Auction with Budget Constrained Bidders

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  • Dolf Talman
  • Zaifu Yang
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    Abstract

    An auctioneer wishes to sell several heterogeneous indivisible items to a group of potential bidders. Each bidder has valuations over the items but might face a budget constraint and may therefore not be able to pay up to his values. In such markets, a competitive equilibrium typically fails to exist. We develop a novel dynamic auction and prove that the auction always ï¬nds a core allocation. The core allocation consists of an assignment of the items and its associated supporting price vector and is Pareto efficient.

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    Bibliographic Info

    Paper provided by Department of Economics, University of York in its series Discussion Papers with number 13/31.

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    Date of creation: Nov 2013
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    Handle: RePEc:yor:yorken:13/31

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    Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
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    Web page: http://www.york.ac.uk/economics/
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    Related research

    Keywords: Dynamic auction; multi-item auction; budget constraint; core; efficiency;

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    1. Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice
      [Auctions: Theory and Practice]
      ," Introductory Chapters, Princeton University Press.
    2. Paul Klemperer & Aytek Erdil, 2009. "A New Payment Rule for Core-Selecting Package Auctions," Economics Series Working Papers 2009-W11, University of Oxford, Department of Economics.
    3. Jean-Pierre Benoit & Vijay Krishna, 1998. "Multiple-Object Auctions with Budget Constrained Bidders," Game Theory and Information 9805001, EconWPA, revised 26 Jul 1999.
    4. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford.
    5. Paul Milgrom, 2000. "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 245-272, April.
    6. 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.
    7. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721, October.
    8. Carolyn Pitchik, 2008. "Budget-Constrained Sequential Auctions with Incomplete Information," Working Papers tecipa-342, University of Toronto, Department of Economics.
    9. Robert Day & Paul Milgrom, 2008. "Core-selecting package auctions," International Journal of Game Theory, Springer, vol. 36(3), pages 393-407, March.
    10. Ausubel Lawrence M & Milgrom Paul R, 2002. "Ascending Auctions with Package Bidding," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-44, August.
    11. 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.
    12. 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.
    13. Zheng, Charles Zhoucheng, 2001. "High Bids and Broke Winners," Staff General Research Papers 12665, Iowa State University, Department of Economics.
    14. Kelso, Alexander S, Jr & Crawford, Vincent P, 1982. "Job Matching, Coalition Formation, and Gross Substitutes," Econometrica, Econometric Society, vol. 50(6), pages 1483-1504, November.
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