Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/31205
Authors: 
Pai, Mallesh
Vohra, Rakesh V.
Year of Publication: 
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

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