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Title:Optimal auctions with financially constrained bidders PDF Logo
Authors:Pai, Mallesh
Vohra, Rakesh V.
Issue Date:2008
Series/Report no.:Discussion paper // Center for Mathematical Studies in Economics and Management Science 1471
Abstract:We consider an environment where potential buyers of an indivisible good have liquidity constraints, in that they cannot pay more than their `budget' regardless of their valuation. A buyer's valuation for the good as well as her budget are her private information. We derive constrained-e±cient and revenue maximizing auctions for this setting. In general, the optimal auction requires `pooling' both at the top and in the middle despite the maintained assumption of a monotone hazard rate. Further, the auctioneer will never ¯nd it desirable to subsidize bidders with low budgets.
Subjects:optimal auction
budget constraints
JEL:D44
Document Type:Working Paper
Appears in Collections:Discussion Papers, Kellogg School of Management, Northwestern University

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