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Speculation in Standard Auctions with Resale

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  • Rod Garratt
  • Thomas Tröger

Abstract

In standard auctions resale creates a role for a speculator-a bidder who is commonly known to have no use value for the good on sale. We study this issue in environments with symmetric independent private-value bidders. For second-price and English auctions the efficient value-bidding equilibrium coexists with a continuum of inefficient equilibria in which the speculator wins the auction and makes positive profits. First-price and Dutch auctions have an essentially unique equilibrium, and whether or not the speculator wins the auction and distorts the final allocation depends on the number of bidders, the value distribution, and the discount factor. Speculators do not make profits in first-price or Dutch auctions. Copyright The Econometric Society 2006.

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File URL: http://hdl.handle.net/10.1111/j.1468-0262.2006.00681.x
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Bibliographic Info

Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 74 (2006)
Issue (Month): 3 (05)
Pages: 753-769

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Handle: RePEc:ecm:emetrp:v:74:y:2006:i:3:p:753-769

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  1. Giacomo Calzolari & Alessandro Pavan, 2004. "Monopoly with Resale," Discussion Papers 1393, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Klemperer, Paul, 1999. "Auction Theory: a Guide to the Literature," CEPR Discussion Papers 2163, C.E.P.R. Discussion Papers.
  3. Gupta, Madhurima & Lebrun, Bernard, 1999. "First price auctions with resale," Economics Letters, Elsevier, vol. 64(2), pages 181-185, August.
  4. Lawrence M. Ausubel & Peter Cramton, 1998. "The Optimality of Being Efficient," Papers of Peter Cramton 98wpoe, University of Maryland, Department of Economics - Peter Cramton, revised 18 Jun 1999.
  5. Philippe Jehiel & Benny Moldovanu, 1998. "Efficient Design with Interdependent Valuations," Discussion Papers 1244, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Rothkopf, Michael H & Teisberg, Thomas J & Kahn, Edward P, 1990. "Why Are Vickrey Auctions Rare?," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 94-109, February.
  7. Rod Garratt & Thomas Tröger, 2006. "Speculation in Standard Auctions with Resale," Econometrica, Econometric Society, vol. 74(3), pages 753-769, 05.
  8. Garratt, Rod & Troger, Thomas E, 2003. "Speculation in Second-Price Auctions with Resale," University of California at Santa Barbara, Economics Working Paper Series qt0bj7w3z6, Department of Economics, UC Santa Barbara.
  9. ehiel, Philippe & Benny Moldovanu & Ennio Stacchetti, 1994. "How (not) to sell nuclear weapons," Discussion Paper Serie B 288, University of Bonn, Germany.
  10. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 72-110, January.
  11. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. Thomas Troger, 2003. "Speculation in First-Price Auctions with Resale," Microeconomics 0308001, EconWPA.
  14. Maskin, Eric & Tirole, Jean, 1992. "The Principal-Agent Relationship with an Informed Principal, II: Common Values," Econometrica, Econometric Society, vol. 60(1), pages 1-42, January.
  15. Haile, Philip A., 2000. "Partial Pooling at the Reserve Price in Auctions with Resale Opportunities," Games and Economic Behavior, Elsevier, vol. 33(2), pages 231-248, November.
  16. Haile,P.A., 1999. "Auctions with resale," Working papers 33, Wisconsin Madison - Social Systems.
  17. Charles Zheng, 2000. "An Optimal Auction When Resale Cannot Be Prohibited," Discussion Papers 1303, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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