First-Price Auctions with Budget Constraints

71 Pages Posted: 13 Jun 2019

See all articles by Maciej H. Kotowski

Maciej H. Kotowski

Harvard University - Harvard Kennedy School (HKS)

Date Written: June 10, 2019


Consider a first-price, sealed-bid auction with interdependent valuations and private budget constraints. Private budget constraints introduce subtle strategic tradeoffs with first-order consequences for equilibrium bidding. In a pure-strategy, symmetric equilibrium, agents may adopt discontinuous bidding strategies resulting in a stratification of competition along the budget dimension. In an asymmetric setting, equilibria in “nondecreasing” strategies exist, albeit in a qualified sense. Private budgets introduce significant confounds for the interpretation of bidding data due to their interaction with risk preferences and their countervailing strategic implications.

Keywords: First-Price Auctions, Budget Constraints, Interdependent Values, Asymmetric Auctions, Monotone Equilibrium

JEL Classification: D44

Suggested Citation

Kotowski, Maciej H., First-Price Auctions with Budget Constraints (June 10, 2019). HKS Working Paper No. RWP19-021, June 2019. Available at SSRN: or

Maciej H. Kotowski (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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