Simultaneous Ascending Bid Auctions with Budget Constraints
49 Pages Posted: 31 Oct 2008
Date Written: August 2002
We identify and analyze three distinct effects arising from potentially binding budget constraints in multi-unit ascending auctions. First, binding budgets clearly reduce the level of competition among bidders. Second, budget constraints may at the same time make it difficult to sustain collusive equilibria when bidders lack sufficient resources to punish defectors.Third, the mere possibility, even if arbitrarily small, of binding budget constraints can reduce competition substantially because bidders can pretend to be constrained, even if they are not.In this cases, measures restricting the participation of low-budget bidders, e.g. reserve prices, can increase social welfare.
Keywords: Auctions, Multiple Objects, Collusion
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