Bidding to Lose? Auctions with Resale
Abstract
After an auction, a losing bidder can purchase the prize from the winner. We show why a strong bidder may prefer to drop out of the auction before the price has reached her valuation, and acquire the prize in the aftermarket: a strong bidder may be in a better bargaining position in the aftermarket if her rival won at a relatively low price. So it can be common knowledge that, in equilibrium, a weak bidder will win the auction and, even without uncertainty about relative valuations, resale will take place. (Furthermore, the result is robust to the addition of bidding costs.) And the possibility of reselling to a strong bidder attracts weak bidders to participate in the auction, and raises the seller's revenue. We explore how the seller can manipulate the conditions under which wealth-constrained bidders can finance their bids in order to induce a resale-equilibrium which raises the auction price.Download Info
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Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 116.Length:
Date of creation: 01 Mar 2004
Date of revision: 01 Nov 2006
Publication status: Published in RAND Journal of Economics, 2007, 38(4), 1090-1112
Handle: RePEc:sef:csefwp:116
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Related research
Keywords:Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-03-22 (All new papers)
- NEP-DEV-2004-03-22 (Development)
- NEP-MIC-2004-03-22 (Microeconomics)
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Alexander Matros & Andriy Zapechelnyuk, 2010. "Competition of E-Commerce Intermediaries," Working Papers 675, Queen Mary, University of London, School of Economics and Finance.
- Bernard Lebrun, 2008. "First-Price, Second-Price, and English Auctions with Resale," Working Papers 2008_06, York University, Department of Economics.
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"Are Disadvantaged Bidders Doomed in Ascending Auctions?,"
CSEF Working Papers
169, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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- Pagnozzi, Marco & Saral, Krista Jabs, 2013.
"Multi-Object Auctions with Resale: An Experimental Analysis,"
MPRA Paper
43665, University Library of Munich, Germany.
- Marco Pagnozzi & Krista Jabs Saral, 2013. "Multi-Object Auctions with Resale: An Experimental Analysis," CSEF Working Papers 328, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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"Resale and bundling in auctions,"
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"Optimal Mechanisms for an Auction Mediator,"
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