Article
Economics Letters

Participation Constraints in the Vickrey Auction

By: Jerry R. Green and Jean-Jacques Laffont

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Abstract

Economic agents are characterized by two privately observable parameters: their willingness to pay for an item being auctioned, and their reservation utility level which must be exceeded, in expectation, to induce them to participate in this auction. This creates a situation in which the distribution of willingnesses to pay among the bidders is endogenous. For the case in which the parameters are jointly uniformly distributed, the existence of an equilibrium is proven and characterized.