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Monopoly with Resale

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Author Info
Giacomo Calzolari
Alessandro Pavan

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Abstract

This paper examines the intricacies associated with the design of revenue-maximizing mechanisms for a monopolist who expects her buyers to resell. We consider two cases: resale to a third party who does not participate in the primary market and inter-bidder resale, where the winner resells to the losers. To influence the resale outcome, the monopolist must design an allocation rule and a disclosure policy that optimally fashion the beliefs of the participants in the secondary market. Our results show that the revenue-maximizing mechanism may require a stochastic selling procedure and a disclosure policy richer than the simple announcement of the decision to trade.

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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 1405.

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Date of creation: Jul 2005
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Handle: RePEc:nwu:cmsems:1405

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Related research
Keywords: information linkage between primary and secondary markets; optimal disclosure policy; stochastic allocations; mechanism design.;

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

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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.:
  1. Bulow, Jeremy & Roberts, John, 1989. "The Simple Economics of Optimal Auctions," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1060-90, October. [Downloadable!] (restricted)
  2. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer. [Downloadable!] (restricted)
  3. 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. [Downloadable!]
  4. Jehiel, Philippe & Benny Moldovanu, 1994. "Strategic Non-Participation," Discussion Paper Serie B 287, University of Bonn, Germany.
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  5. repec:att:wimass:19199933 is not listed on IDEAS
  6. Jean-Jacques Laffont & Jean Tirole, 1985. "The Dynamics of Incentive Contracts," Working papers 397, Massachusetts Institute of Technology (MIT), Department of Economics.
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  7. Charles Zhoucheng Zheng, 2002. "Optimal Auction with Resale," Econometrica, Econometric Society, vol. 70(6), pages 2197-2224, November. [Downloadable!] (restricted)
  8. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  9. McMillan, John, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-62, Summer. [Downloadable!] (restricted)
  10. Maskin, Eric & Tirole, Jean, 1990. "The Principal-Agent Relationship with an Informed Principal: The Case of Private Values," Econometrica, Econometric Society, vol. 58(2), pages 379-409, March. [Downloadable!] (restricted)
  11. Riley, John G & Samuelson, William F, 1981. "Optimal Auctions," American Economic Review, American Economic Association, vol. 71(3), pages 381-92, June. [Downloadable!] (restricted)
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  12. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April. [Downloadable!] (restricted)
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  13. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 72-110, January. [Downloadable!] (restricted)
  14. Michael Schwarz & Konstantin Sonin, 2001. "The Variable Value Environment: Auctions and Actions," Harvard Institute of Economic Research Working Papers 1918, Harvard - Institute of Economic Research. [Downloadable!]
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  15. Philippe Jehiel & Benny Moldovanu, 2000. "Auctions with Downstream Interaction Among Buyers," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 768-791, Winter.
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  16. Laffont, Jean-Jacques & Tirole, Jean, 1990. "Adverse Selection and Renegotiation in Procurement," Review of Economic Studies, Blackwell Publishing, vol. 57(4), pages 597-625, October. [Downloadable!] (restricted)
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  17. Gupta, Madhurima & Lebrun, Bernard, 1999. "First price auctions with resale," Economics Letters, Elsevier, vol. 64(2), pages 181-185, August. [Downloadable!] (restricted)
  18. Jehiel, Philippe & Moldovanu, Benny, 1999. "Resale Markets and the Assignment of Property Rights," Review of Economic Studies, Blackwell Publishing, vol. 66(4), pages 971-91, October. [Downloadable!] (restricted)
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  19. Harris, Milton & Raviv, Artur, 1981. "Allocation Mechanisms and the Design of Auctions," Econometrica, Econometric Society, vol. 49(6), pages 1477-99, November. [Downloadable!] (restricted)
Full references

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.)

  1. Bernard Lebrun, 2008. "First-Price, Second-Price, and English Auctions with Resale," Working Papers 2008_06, York University, Department of Economics. [Downloadable!]
  2. Giacomo Calzolari & Alessandro Pavan, 2004. "On the Optimality of Privacy in Sequential Contracting," Discussion Papers 1394, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  3. Hannu Vartiainen, 2009. "Auction Design without Commitment," Discussion Papers 44, Aboa Centre for Economics. [Downloadable!]
    Other versions:
  4. Thomas Tröger & Rodney Garratt & Charles Zheng, 2008. "Collusion via Resale," Bonn Econ Discussion Papers bgse20_2008, University of Bonn, Germany. [Downloadable!]
    Other versions:
  5. Rod Garratt & Thomas Troger, 2004. "Speculation in Standard Auctions with Resale," Microeconomics 0405005, EconWPA. [Downloadable!]
    Other versions:
  6. Marco Pagnozzi, 2004. "Bidding to Lose? Auctions with Resale," CSEF Working Papers 116, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
  7. Alexander Matros & Andriy Zapechelnyuk, 2008. "Optimal fees in internet auctions," Review of Economic Design, Springer, vol. 12(3), pages 155-163, September. [Downloadable!] (restricted)
    Other versions:
  8. Marco Pagnozzi, 2007. "Resale and Bundling in Auctions," CSEF Working Papers 186, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
  9. Sui, Yong, 2006. "All-pay auctions with resale," MPRA Paper 11463, University Library of Munich, Germany, revised Oct 2007. [Downloadable!]
  10. Tymofiy Mylovanov & Thomas Tröger, 2009. "Optimal auction with resale—a characterization of the conditions," Economic Theory, Springer, vol. 40(3), pages 509-528, September. [Downloadable!] (restricted)
  11. Rod Garratt & Thomas Troger, 2003. "Speculation in Second-Price Auctions with Resale," University of California at Santa Barbara, Economics Working Paper Series wp4-03, Department of Economics, UC Santa Barbara. [Downloadable!]
    Other versions:
  12. Alexander Matros & Andriy Zapechelnyuk, 2009. "Competing Auction Houses," Discussion Papers 17, Kyiv School of Economics. [Downloadable!]
  13. Marco Pagnozzi, 2007. "Should Speculators Be Welcomed in Auctions?," CSEF Working Papers 176, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
  14. Tymofiy Mylovanov & Thomas Tröger, 2006. "A Characterization of the Conditions for Optimal Auction with Resale," Discussion Papers 128, 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. [Downloadable!]
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