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Simultaneous ascending auctions with complementarities and known budget constraints

  • Sandro Brusco

    ()

  • Giuseppe Lopomo

    ()

We study simultaneous ascending auctions of identical objects when bidders are financially constrained and their valuations exhibit complementarities. We assume the budget constraints are known but the values for individual objects are private information, and characterize noncollusive equilibria. The equilibria exhibit the exposure problem. The bidder with the highest budget is more reluctant to bid, because the bidder with the lowest budget may end up pursuing only one object, thus preventing the realization of complementarities. In some states of the world both objects are assigned to the ‘poorer’ bidder although that bidder has a lower valuation. Classification number-JEL: D44,H.

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File URL: http://hdl.handle.net/10.1007/s00199-007-0217-8
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Article provided by Springer in its journal Economic Theory.

Volume (Year): 38 (2009)
Issue (Month): 1 (January)
Pages: 105-124

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Handle: RePEc:spr:joecth:v:38:y:2009:i:1:p:105-124
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  1. Brusco, Sandro & Lopomo, Giuseppe, 2002. "Collusion via Signalling in Simultaneous Ascending Bid Auctions with Heterogeneous Objects, with and without Complementarities," Review of Economic Studies, Wiley Blackwell, vol. 69(2), pages 407-36, April.
  2. 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.
  3. Zheng, Charles Z., 2012. "Jump bidding and overconcentration in decentralized simultaneous ascending auctions," Games and Economic Behavior, Elsevier, vol. 76(2), pages 648-664.
  4. Krishna, Vijay & Rosenthal, Robert W., 1996. "Simultaneous Auctions with Synergies," Games and Economic Behavior, Elsevier, vol. 17(1), pages 1-31, November.
  5. Sander Onderstal & Florian Englmaier & Pablo Guillen & Loreto Llorente & Rupert Sausgruber, 2004. "The Chopstick Auction: A Study of the Exposure Problem in Multi-Unit Auctions," Working Papers 2004.10, Fondazione Eni Enrico Mattei.
  6. Robert W. Rosenthal & Ruqu Wang, 1995. "Simultaneous Auctions with Synergies and Common Values," Papers 0060, Boston University - Industry Studies Programme.
  7. repec:ebl:ecbull:v:4:y:2004:i:8:p:1-14 is not listed on IDEAS
  8. Sandro Brusco & Giuseppe Lopomo, 2004. "Simultaneous Ascending Bid Auctions with Privately Known Budget Constraints," Levine's Bibliography 122247000000000373, UCLA Department of Economics.
  9. repec:cup:cbooks:9780521551847 is not listed on IDEAS
  10. Richard Engelbrecht-Wiggans & Charles M. Kahn, 2005. "Low-Revenue Equilibria in Simultaneous Ascending-Bid Auctions," Management Science, INFORMS, vol. 51(3), pages 508-518, March.
  11. Jehiel, Phillipe & Moldovanu, Benny & Stacchetti, E., 1997. "Multidimensional Mechanism Design for Auctions with Externalities," Sonderforschungsbereich 504 Publications 97-04, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  12. Benoit, Jean-Pierre & Krishna, Vijay, 2001. "Multiple-Object Auctions with Budget Constrained Bidders," Review of Economic Studies, Wiley Blackwell, vol. 68(1), pages 155-79, January.
  13. 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.
  14. Gian Albano & Fabrizio Germano & Stefano Lovo, 2006. "Ascending auctions for multiple objects: the case for the Japanese design," Economic Theory, Springer, vol. 28(2), pages 331-355, 06.
  15. Rajiv Vohra & In-Koo Cho & Kevin Jewell, 2002. "A simple model of coalitional bidding," Economic Theory, Springer, vol. 19(3), pages 435-457.
  16. Szentes, Balazs & Rosenthal, Robert W., 2003. "Beyond chopsticks: Symmetric equilibria in majority auction games," Games and Economic Behavior, Elsevier, vol. 45(2), pages 278-295, November.
  17. Fang, Hanming & Parreiras, Sergio O., 2002. "Equilibrium of Affiliated Value Second Price Auctions with Financially Constrained Bidders: The Two-Bidder Case," Games and Economic Behavior, Elsevier, vol. 39(2), pages 215-236, May.
  18. Szentes, Balazs & Rosenthal, Robert W., 2003. "Three-object two-bidder simultaneous auctions: chopsticks and tetrahedra," Games and Economic Behavior, Elsevier, vol. 44(1), pages 114-133, July.
  19. 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.
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