BUDGET CONSTRAINTS AND DEMAND REDUCTION IN SIMULTANEOUS ASCENDING-BID AUCTIONS

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 the...

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Bibliographic Details
Published in:The Journal of industrial economics 2008-03, Vol.56 (1), p.113-142
Main Authors: BRUSCO, SANDRO, LOPOMO, GIUSEPPE
Format: Article
Language:English
Subjects:
Aggregate demand
Auctions
Bidding
Bids
Budget constraints
Collusion
Demand
Financial budgets
Livestock auctions
Publishing industry
Stopping distances
Studies
Zero
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Summary: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.
ISSN:0022-1821
1467-6451
DOI:10.1111/j.1467-6451.2008.00335.x