Optimal Auctions with Financially Constrained Bidders
We consider an environment where potential buyers of an indi- visible good have liquidity constraints, in that they cannot pay more than their `budget' regardless of their valuation. A buyer's valuation for the good as well as her budget are her private information. We derive constrained-efficient and revenue maximizing auctions for this setting. In general, the optimal auction requires `pooling' both at the top and in the middle despite the maintained assumption of a mono- tone hazard rate. Further, the auctioneer will never¯find it desirable to subsidize bidders with low budgets.
|Date of creation:||Aug 2008|
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|Contact details of provider:|| Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014|
Web page: http://www.kellogg.northwestern.edu/research/math/
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