Budget Constraints and Demand Reduction in Simultaneous Ascending-Bid Auctions Articles uri icon

authors

  • BRUSCO, SANDRO
  • LOPOMO, GIUSEPPE

publication date

  • March 2008

start page

  • 113

end page

  • 142

issue

  • 1

volume

  • 56

International Standard Serial Number (ISSN)

  • 0022-1821

Electronic International Standard Serial Number (EISSN)

  • 1467-6451

abstract

  • The possibility, even if arbitrarily small, of binding budget constraints in simultaneous ascending bid auctions induces strategic demand reduction and generates significant inefficiencies. Under mild conditions on the distributions of the bidders' values, unconstrained bidders behave as if they were liquidity constrained, even as the probability that bidders are budget constrained goes to zero.