A near Pareto optimal auction with budget constraints |
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| Authors: | Isa E Hafalir R Ravi Amin Sayedi |
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| Institution: | 1. Department of Industrial Engineering, Middle East Technical University, Ankara 06800, Turkey;2. Clinical Excellence Research Center, Stanford University, Stanford, CA 94305, United States;1. School of Information, University of Michigan, 105 S. State Street, Ann Arbor, MI 48109, United States;2. CERGE-EI, Politických vězň? 7, 110 00 Praha 1, Czech Republic;3. London Business School, Regent?s Park, London, NW1 4SA, United Kingdom;1. Department of Economics, 238 McCormick Road, University of Virginia, Charlottesville, VA 22903, United States;2. Board of Governors, 20th Street and Constitution Avenue N.W., Washington, DC 20551, United States;3. School of Economics, Colin Clark Building (39), University of Queensland, St Lucia, QLD 4072, Australia;4. Bank of Canada, 234 Wellington Street West, Ottawa, ON K1A 0G9 |
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| Abstract: | In a setup where a divisible good is to be allocated to a set of bidders with budget constraints, we introduce a mechanism in the spirit of the Vickrey auction. In the mechanism we propose, understating budgets or values is weakly dominated. Since the revenue is increasing in budgets and values, all kinds of equilibrium deviations from true valuations turn out to be beneficial to the auctioneer. We also show that ex-post Nash equilibrium of our mechanism is near Pareto optimal in the sense that all full winners? values are above all full losers? values. |
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