Auctions with Resale Market and Asymmetric Information
AbstractIn this paper we study the role of resale opportunities in secondary markets over the bidding process in first and second price auctions. This trade opportunity arises owing to the presence of two factors. On the one hand, after receiving the object, the winner obtains new information about the objectÂ’s value and on the other hand, the winner may suffer a liquidity shock that force him to sell the object regardless of his valuation. The buyer in the secondary market, however, does not know if the good is being sold because the new information reveals bad news regarding the objectÂ’s valuation, or because a liquidity shock affected the seller. Our results show that revenue equivalence still holds, and bids are usually lower than those observed in the absence of liquidity shocks.
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Bibliographic InfoPaper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 332.
Date of creation: 2008
Date of revision:
Auctions; resale market; adverse selection;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-15 (All new papers)
- NEP-CTA-2008-04-15 (Contract Theory & Applications)
- NEP-MIC-2008-04-15 (Microeconomics)
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