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A multi-item auction with budget-constrained bidders and price controls

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  • Zhou, Yu

Abstract

We extend the multi-item auction model of Talman and Yang (2008) and Andersson et al. (2015) by considering both unit-demand bidders with budget constraints and price controls on bidding items. Due to these budget and price restrictions, a Walrasian equilibrium generally fails to exist. To achieve efficiency, we propose a rationed equilibrium whose allocation is in the core. We also construct an ascending auction to find the proposed rationed equilibrium in (pseudo-)polynomial time.

Suggested Citation

  • Zhou, Yu, 2017. "A multi-item auction with budget-constrained bidders and price controls," Economics Letters, Elsevier, vol. 155(C), pages 76-79.
    • Handle: RePEc:eee:ecolet:v:155:y:2017:i:c:p:76-79
    DOI: 10.1016/j.econlet.2017.03.012
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    References listed on IDEAS

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    1. Lavi, Ron & May, Marina, 2012. "A note on the incompatibility of strategy-proofness and Pareto-optimality in quasi-linear settings with public budgets," Economics Letters, Elsevier, vol. 115(1), pages 100-103.
    2. Andersson, Tommy & Yang, Zaifu & Zhang, Dongmo, 2015. "How to efficiently allocate houses under price controls?," Economics Letters, Elsevier, vol. 130(C), pages 97-99.
    3. T. Andersson & C. Andersson & A. Talman, 2013. "Sets in excess demand in simple ascending auctions with unit-demand bidders," Annals of Operations Research, Springer, vol. 211(1), pages 27-36, December.
    4. Gerard van der Laan & Zaifu Yang, 2016. "An ascending multi-item auction with financially constrained bidders," The Journal of Mechanism and Institution Design, Society for the Promotion of Mechanism and Institution Design, University of York, vol. 1(1), pages 109-149, December.
    5. Demange, Gabrielle & Gale, David & Sotomayor, Marilda, 1986. "Multi-Item Auctions," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 863-872, August.
    6. Herings, P. Jean-Jacques, 2018. "Equilibrium and matching under price controls," Journal of Economic Theory, Elsevier, vol. 177(C), pages 222-244.
    7. Talman, Dolf & Yang, Zaifu, 2008. "A dynamic auction for differentiated items under price rigidities," Economics Letters, Elsevier, vol. 99(2), pages 278-281, May.
    8. A. Talman & Zaifu Yang, 2015. "An efficient multi-item dynamic auction with budget constrained bidders," International Journal of Game Theory, Springer;Game Theory Society, vol. 44(3), pages 769-784, August.
    9. Maskin, Eric S., 2000. "Auctions, development, and privatization: Efficient auctions with liquidity-constrained buyers," European Economic Review, Elsevier, vol. 44(4-6), pages 667-681, May.
    10. Talman, A.J.J. & Yang, Z.F., 2008. "A dynamic auction for differentiated items under price rigidity," Other publications TiSEM dbce61c1-07fd-4e95-a9c1-4, Tilburg University, School of Economics and Management.
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    Cited by:

    1. Andrew MACKENZIE & Yu ZHOU, 2022. "Tract Housing, The Core, And Pendulum Auctions," Discussion papers e-22-005, Graduate School of Economics , Kyoto University.

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    More about this item

    Keywords

    Rationed equilibrium; Budget constraints; Price controls; Core allocation; Multi-item auction;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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