Trading mechanism selection with budget constraints

Selcuk, Cemil ORCID: https://orcid.org/0000-0002-2267-604X 2011. Trading mechanism selection with budget constraints. [Working Paper]. MPRA, vol. 36227. Munich: University Library of Munich, Germany. Available at: http://econpapers.repec.org/paper/pramprapa/36227....

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Abstract

We present an equilibrium search model of competing mechanisms where some buyers are budget constrained. Absent budget constraints, the existing literature capitulates that if buyers differ in their valuations then in the unique equilibrium all sellers hold second price auctions (e.g. McAfee (1993)) whereas if buyers are homogeneous then sellers are indifferent across a large number of payoff-equivalent mechanisms (e.g. Eeckhout and Kircher (2010)). We show that these results are not robust to the presence of budget constrained buyers; merely lowering the budgets of a few buyers renders the auction equilibrium as well as payoff equivalence unsustainable. If buyers differ only slightly in terms of their ability to pay then sellers prefer fixed price trading; otherwise they prefer auctions.

Item Type:	Monograph (Working Paper)
Date Type:	Publication
Status:	Unpublished
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce H Social Sciences > HG Finance
Uncontrolled Keywords:	Trading Mechanisms; Budget Constraints; Competitive Search.
Publisher:	University Library of Munich, Germany
Last Modified:	20 Oct 2022 08:48
URI:	https://orca.cardiff.ac.uk/id/eprint/29695

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