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Auctions with resale and risk aversion

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  • Sanyyam Khurana

    (University of Delhi)

Abstract

This paper provides necessary conditions of an equilibrium for a first-price auction with resale when one of the two bidders participating in the auction is risk averse and the other bidder is risk neutral. We show that the risk averse bidder bids more aggressively than the risk neutral bidder. If the probability distributions are identical, then the risk averse bidder wins the auction more often than the risk neutral bidder. We also construct an example to show that, if the probability distributions are non-identical, then “bid symmetrization” may hold.

Suggested Citation

  • Sanyyam Khurana, 2022. "Auctions with resale and risk aversion," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(1), pages 117-128, May.
    • Handle: RePEc:spr:etbull:v:10:y:2022:i:1:d:10.1007_s40505-022-00221-7
    DOI: 10.1007/s40505-022-00221-7
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    References listed on IDEAS

    as
    1. Cheng, Harrison, 2011. "Auctions with resale and bargaining power," Journal of Mathematical Economics, Elsevier, vol. 47(3), pages 300-308.
    2. Bernard Lebrun, 2010. "First‐price auctions with resale and with outcomes robust to bid disclosure," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 165-178, March.
    3. Hafalir, Isa & Krishna, Vijay, 2009. "Revenue and efficiency effects of resale in first-price auctions," Journal of Mathematical Economics, Elsevier, vol. 45(9-10), pages 589-602, September.
    4. Isa Hafalir & Vijay Krishna, 2008. "Asymmetric Auctions with Resale," American Economic Review, American Economic Association, vol. 98(1), pages 87-112, March.
    5. Virág, Gábor, 2016. "Auctions with resale: Reserve prices and revenues," Games and Economic Behavior, Elsevier, vol. 99(C), pages 239-249.
    6. Harrison Cheng & Guofu Tan, 2010. "Asymmetric common-value auctions with applications to private-value auctions with resale," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 45(1), pages 253-290, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    First-price auction; Resale; Asymmetry; Risk aversion;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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