This paper illustrates the intricacies associated with the design of revenue-maximizing mechanisms for a monopolist who expects her buyers to resell in a secondary market. We consider two modes of resale: the first is to a third party who does not participate in the primary market; the second is inter-bidders resale, where the winner in the primary market resells to the losers. The main contribution is in showing how revenue-maximizing mechanisms can be designed investigating the optimal informational linkage with the secondary market. To control the price in the resale game, the monopolist must design an allocation rule and a disclosure policy that optimally fashion the beliefs of the participants in the resale market. We show that it is generically impossible to maximize revenue through deterministic selling procedures and disclosing only the decision to trade with a particular buyer. To create the optimal informational linkage, the monopolist may need to induce stochastic allocations and disclose also the price paid in the primary market. The optimal allocation rule and disclosure policy maximize the expected sum of the bidders’ resale-augmented virtual valuations under the constraints imposed by the sequential rationality of the bidders’ offers in the resale game.
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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number
1393.
Length: Date of creation: Jul 2004 Date of revision: Handle: RePEc:nwu:cmsems:1393
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Giacomo Calzolari & Alessandro Pavan, 2005.
"Monopoly with Resale,"
Discussion Papers
1405, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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Giacomo Calzolari & Alessandro Pavan, 2003.
"Monopoly with Resale,"
Working Papers
2003.20, Fondazione Eni Enrico Mattei.
[Downloadable!]
Find related papers by JEL classification: D44 - Microeconomics - - Market Structure and Pricing - - - Auctions D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Riley, John G & Samuelson, William F, 1981.
"Optimal Auctions,"
American Economic Review,
American Economic Association, vol. 71(3), pages 381-92, June.
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Rod Garratt & Thomas Tröger, 2005.
"Speculation in Standard Auctions with Resale,"
Discussion Papers
42, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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