Hard Budget Constraints and Bidding for Resources(I'm not actually advocating that pseudo-firms with hard budget constraints should bid with play-money for resources in auctions, I'm just investigating that idea.)
We assume here that getting an injection of extra play-money out of schedule is either something that literally never happens or is such an extra-ordinary event that the people in the pseudo-firms don't expect to ever receive that. That's what we mean by hard budget constraints. In the following, I will stick to a very simple model that has a given pile of resources and pseudo-firms that take from the pile to transform resources into consumer items. Each transformation happens entirely inside of one such pseudo-firm. So if we get something to work within that model world, the result is not directly applicable to the real world with its many multi-step production processes that are not vertically integrated.
When a pseudo-firm runs out of play-money, does it lose its ability to access the bidding platform at all? That sounds bad. We can prevent that with the option of zero-price bid, or if we want to be a bit more poetic, empty-hand bid or
karate bid ("kara te" literally means "empty hand" in Japanese👈🤓). We do a
strict ranking of all pseudo-firms, those with higher initial budget ranked higher, and whenever there are tied bids, we resolve this by referring to the ranks. So when only one pseudo-firm bids for a resource with a karate bid, it gets the resource for free. A pseudo-firm without any budget left can still submit karate bids.
Among those pseudo-firms without budgets, everything is resolved by rank. But does the bidding system need to degenerate in such an extreme way? We can do something to make that highly unlikely, since the bidding system is digital. Suppose every pseudo-firm receives with their budget a
POMF (
Penny
Of
Million
Fragments), then the broke pseudo-firms can still properly play the bidding game with each other as long as they still have just some fractional pennies left in their accounts.
All in all, this still sounds pretty lousy. Pseudo-firms tasked with very important tasks should not lose access to resources even if they run out of budget. But if they have high hopes for play-money injection
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