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An Efficient Multi-Item Dynamic Auction with Budget Constrained Bidders


  • Dolf Talman
  • Zaifu Yang


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.

Suggested Citation

  • Dolf Talman & Zaifu Yang, 2013. "An Efficient Multi-Item Dynamic Auction with Budget Constrained Bidders," Discussion Papers 13/31, Department of Economics, University of York.
  • Handle: RePEc:yor:yorken:13/31

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    References listed on IDEAS

    1. Aytek Erdil & Paul Klemperer, 2010. "A New Payment Rule for Core-Selecting Package Auctions," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 537-547, 04-05.
    2. Jean-Pierre Benoît & Vijay Krishna, 2001. "Multiple-Object Auctions with Budget Constrained Bidders," Review of Economic Studies, Oxford University Press, vol. 68(1), pages 155-179.
    3. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
    4. 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.
    5. Talman, A.J.J. & Yang, Z.F., 2011. "An Efficient Multi-Item Dynamic Auction with Budget Constrained Bidders," Discussion Paper 2011-096, Tilburg University, Center for Economic Research.
    6. Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1.
    7. Pitchik, Carolyn, 2009. "Budget-constrained sequential auctions with incomplete information," Games and Economic Behavior, Elsevier, vol. 66(2), pages 928-949, July.
    8. Robert Day & Paul Milgrom, 2008. "Core-selecting package auctions," International Journal of Game Theory, Springer;Game Theory Society, vol. 36(3), pages 393-407, March.
    9. Zheng, Charles Z., 2001. "High Bids and Broke Winners," Journal of Economic Theory, Elsevier, vol. 100(1), pages 129-171, September.
    10. Demange, Gabrielle & Gale, David & Sotomayor, Marilda, 1986. "Multi-Item Auctions," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 863-872, August.
    11. 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.
    12. 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.
    13. 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, March.
    14. 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, May.
    15. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721, March.
    16. Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1.
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    More about this item


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

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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