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Speculation in Second-Price Auctions with Resale

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  • Rod Garratt
  • Thomas Troger

Abstract

This paper contributes to the literature on second-price auctions with resale. We add speculators---bidders with value zero---to the standard symmetric independent private values environment. There always exists a continuum of inefficient equilibria that are profitable for a speculator. With no reserve price in the initial auction, speculation can enhance the initial seller's expected revenue. On the other hand, speculation can harm the initial seller even if she chooses an optimal reserve price. Our results are valid for English auctions as well.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 506439000000000246.

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Date of creation: 06 Feb 2003
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Handle: RePEc:cla:levarc:506439000000000246

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References

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  1. Edlin, Aaron S. & Shannon, Chris, 1998. "Strict Monotonicity in Comparative Statics," Journal of Economic Theory, Elsevier, Elsevier, vol. 81(1), pages 201-219, July.
  2. Jehiel, Phillipe & Moldovanu, Benny, 1997. "Resale Markets and the Assignment of Property Rights," Sonderforschungsbereich 504 Publications, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim 97-05, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  3. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, Elsevier, vol. 108(1), pages 72-110, January.
  4. Giacomo Calzolari & Alessandro Pavan, 2004. "Monopoly with Resale," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1393, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Binmore, Ken & Samuelson, Larry, 1999. "Evolutionary Drift and Equilibrium Selection," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 66(2), pages 363-93, April.
  6. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, Econometric Society, vol. 70(2), pages 583-601, March.
  7. Thomas Troger, 2003. "Speculation in First-Price Auctions with Resale," Microeconomics, EconWPA 0308001, EconWPA.
  8. Charles Zhoucheng Zheng, 2002. "Optimal Auction with Resale," Econometrica, Econometric Society, Econometric Society, vol. 70(6), pages 2197-2224, November.
  9. Larry M. Ausubel & Raymond J. Deneckere, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Levine's Working Paper Archive 201, David K. Levine.
  10. Haile, Philip A., 2000. "Partial Pooling at the Reserve Price in Auctions with Resale Opportunities," Games and Economic Behavior, Elsevier, Elsevier, vol. 33(2), pages 231-248, November.
  11. Haile,P.A., 1999. "Auctions with resale," Working papers, Wisconsin Madison - Social Systems 33, Wisconsin Madison - Social Systems.
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Cited by:
  1. Rod Garratt & Thomas Tröger, 2006. "Speculation in Standard Auctions with Resale," Econometrica, Econometric Society, Econometric Society, vol. 74(3), pages 753-769, 05.
  2. Marco Pagnozzi, 2004. "Bidding to Lose? Auctions with Resale," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 116, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Nov 2006.
  3. Thomas Troger, 2003. "Speculation in First-Price Auctions with Resale," Microeconomics, EconWPA 0308001, EconWPA.

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