Optimal auctions for asymmetrically budget constrained bidders

Abstract

We consider an environment with a single divisible good and two bidders. The valuations of the bidders are private information but one bidder has a commonly known budget constraint. For this environment we derive the revenue maximizing subsidy free dominant strategy incentive compatible auction.

This is a preview of subscription content, access via your institution.

References

  1. Borgs C, Chayes J, Immorlica N, Mahdian M, Saberi A (2005) Multi-unit auctions with budget constrained bidders. In: Proceeddings of the 6th ACM conference on electronic commerce, pp 44–51

  2. Brusco S, Lopomo G (2007) Simultaneous ascending auctions with complementarirties and known budget constraints. Econ Theory (forthcoming)

  3. Brusco S, Lopomo G (2008) Budget constraints and demand reduction in simultaneous ascending-bid auctions. J Ind Econ 56: 113–142

    Article  Google Scholar 

  4. Che Y-K, Gale I (1996) Expected revenue of all-pay auctions and first-price sealed-bid auctions with budget constraints. Econ Lett 50: 373–379

    Article  Google Scholar 

  5. Che Y-K, Gale I (2000) The optimal mechanism for selling to a budget-constrained buyer. J Econ Theory 92: 198–233

    Article  Google Scholar 

  6. Gavious A, Moldovanu B, Sela A (2002) Bid costs and endogenous bid caps. RAND J Econ 33(4): 709–722

    Article  Google Scholar 

  7. Harris M, Raviv A (1981) A theory of monopoly pricing schemes with demand uncertainty. Am Econ Rev 71: 347–65

    Google Scholar 

  8. Laffont J-J, Robert J (1996) Optimal auction with financially constrained buyers. Econ Lett 52: 181–186

    Article  Google Scholar 

  9. Maskin ES (2000) Auctions, development, and privatization: efficient auctions with liquidity-constrained buyers. Eur Econ Rev 44: 667–681

    Article  Google Scholar 

  10. Myerson R (1981) Optimal auction design. Math Oper Res 6: 58–73

    Article  Google Scholar 

  11. Rochet J-C, Choné P (1998) Ironing, sweeping, andmultidimensional screening. Econometrica 66:783--826

    Article  Google Scholar 

  12. Rochet J-C, Stole LA (2003) The economics of multidimensional screening. In: Dewatripont M, Hansen LP, Turnovsky SJ (eds) Advances in economics and econometrics: theory and applications, eighth world congress. Cambridge University Press, Cambridge

    Google Scholar 

  13. Zheng CZ (2001) High bids and broke winners. J Econ Theory 100: 129–171

    Article  Google Scholar 

Download references

Author information

Affiliations

Authors

Corresponding author

Correspondence to Alexey Malakhov.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Malakhov, A., Vohra, R.V. Optimal auctions for asymmetrically budget constrained bidders. Rev Econ Design 12, 245 (2008). https://doi.org/10.1007/s10058-008-0051-x

Download citation

Keywords

  • Dominant strategy
  • Shortest path
  • Network

JEL Classification

  • C61
  • C70
  • D44