First-price auctions with resale: the case of many bidders
AbstractIf agents engage in resale, it changes bidding in the initial auction. Resale offers extra incentives for bidders with lower valuations to win the auction. However, if resale markets are not frictionless, then use values affect bidding incentives, and stronger bidders still win the initial auction more often than weaker ones. I consider a first price auction followed by a resale market with frictions, and con�rm the above statements. While intuitive, our results differ from the two bidder case of Hafalir and Krishna (2008): the two bidders win with equal probabilities regardless of their use values. The reason is that they face a common (resale) price at the relevant margin, a property that fails with more than two bidders. Numerical simulations show that asymmetry in winning probabilities increases in the number of bidders, and in large markets resale loses its e¤ect on allocations.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 17094.
Date of creation: 2009
Date of revision:
Other versions of this item:
- Gábor Virág, 2013. "First-price auctions with resale: the case of many bidders," Economic Theory, Springer, vol. 52(1), pages 129-163, January.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-11 (All new papers)
- NEP-COM-2009-09-11 (Industrial Competition)
- NEP-EXP-2009-09-11 (Experimental Economics)
- NEP-MKT-2009-09-11 (Marketing)
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