Simultaneous Ascending Bid Auctions with Budget Constraints

49 Pages Posted: 31 Oct 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

Date Written: August 2002

Abstract

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

Suggested Citation

Brusco, Sandro and Lopomo, Giuseppe, Simultaneous Ascending Bid Auctions with Budget Constraints (August 2002). NYU Working Paper No. EC-02-14. Available at SSRN: https://ssrn.com/abstract=1292660

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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