Abstract
An auctioneer wishes to sell several heterogeneous indivisible items to a group of potential bidders. Each bidder has valuations over the items but may face a budget constraint and therefore be unable to pay up to his values. In such markets, a Walrasian equilibrium may fail to exist. We develop a novel dynamic auction and prove that the auction always finds a core allocation. In the auction prices that have been increased can be later decreased if they have become too high. The core allocation consists of an assignment of the items and its associated supporting price vector, achieves Pareto efficiency, and is robust against the threat of deviation by any coalition of market participants.
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Acknowledgments
We are very grateful to the co-editor, associate editor and referees for their comments which helped us to improve the paper considerably. This is a revision of Talman and Yang (2011). The second author gratefully acknowledges the financial support by the Alexander von Humboldt Foundation, the Netherlands Organization for Scientific Research (NWO), CentER of Tilburg University, and the University of York. He wishes to thank the Center for Mathematical Economics (IMW), Bielefeld University, for its hospitality while he was a Humboldt research fellow and finished part of the current paper.
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Talman, A.J.J., Yang, Z. An efficient multi-item dynamic auction with budget constrained bidders. Int J Game Theory 44, 769–784 (2015). https://doi.org/10.1007/s00182-014-0454-6
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DOI: https://doi.org/10.1007/s00182-014-0454-6