Budget Constraints and Demand Reduction in Simultaneous Ascending-Bid Auctions

30 Pages Posted: 14 Apr 2008

See all articles by Sandro Brusco

Sandro Brusco

SUNY at Stony Brook University, College of Arts and Science, Department of Economics

Giuseppe Lopomo

Fuqua School - Duke University; Duke University - Department of Economics

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.

Suggested Citation

Brusco, Sandro and Lopomo, Giuseppe, Budget Constraints and Demand Reduction in Simultaneous Ascending-Bid Auctions. The Journal of Industrial Economics, Vol. 56, Issue 1, pp. 113-142, March 2008. Available at SSRN: https://ssrn.com/abstract=1119638 or http://dx.doi.org/10.1111/j.1467-6451.2008.00335.x

Sandro Brusco (Contact Author)

SUNY at Stony Brook University, College of Arts and Science, Department of Economics ( email )

Stony Brook, NY 11794
United States

Giuseppe Lopomo

Fuqua School - Duke University ( email )

Box 90097
Durham, NC 27708-0097
United States
(919) 660-7820 (Phone)
(919) 660-7971 (Fax)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

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