(Joint With Rakesh Vohra)

We consider an environment where potential buyers for a unique indivisible good have liquidity constraints, in that they cannot pay more than their `budget' regardless of their valuation. A buyer's valuation for the good as well as her budget are her private information. We propose constrained-efficient and revenue maximizing auctions for this setting. In general, the optimal auction requires `pooling' in the middle despite the maintained assumption of a monotone hazard rate. Further, the auctioneer will never find it desirable to subsidize bidders with low budgets.

For the (gated) final published version go here.