Simultaneous ascending auctions with complementarities and known budget constraints

We study simultaneous ascending auctions of two identical objects when bidders are financially constrained and their valuations exhibit complementarities. We assume the budget constraints are known but the values for individual objects are private information, and characterize noncollusive equilibria. Equilibrium behavior is affected by the exposure problem. Bidders with higher budgets are more reluctant to bid, because opponents with lower budgets may end up pursuing a single object, thus preventing the realization of complementarities. Therefore poor bidders may win both objects when they do not have the highest valuation. We gratefully acknowledge comments by Marco Battaglini, Benny Moldovanu and participants at seminars held at Montreal, Yale, Texas A&M, Washington St. Louis and at the Workshop on Mechanism Design with Budget Constraints held at SUNY - Stony Brook. Sandro Brusco acknowledges financial support from the Ministerio de Educacion y Ciencias D.G.E.S., proyecto SEC2001-0445.