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Endogenous Budget Constraints

Patrick Hummel
Mathematical Social Sciences, vol. 88 (2017), pp. 11-15


This paper considers a model in which a single buyer seeks to buy a continuum of objects from a continuum of sellers. The sellers specify prices at which they are willing to sell their objects to the buyer, and the buyer then decides which objects to purchase. I illustrate that the buyer has an incentive to commit to a binding budget constraint before seeking offers from the sellers.