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Should Speculators Be Welcomed in Auctions?

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Author Info
Marco Pagnozzi () (University of Napoli "Federico II" and CSEF)

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Abstract

The possibility of resale after an auction attracts speculators (i.e., bidders who have no use value for the objects on sale). In a multi-object auction, a high-value bidder may strictly prefer to let a speculator win some of the objects and then buy in the resale market, in order to keep the auction price low for the objects she wins in the auction. Therefore, although speculators increase competition in the auction, they also affect high-value bidders.incentives to .reduce demand..We show that the net e¤ect on the seller.s revenue of allowing resale to attract speculators depends on the heterogeneity of bidders.valuations. But the presence of speculators may increase the seller.s revenue only if speculators are eventually outbid. We also analyze the effect on the seller.s revenue of allowing resale in the absence of speculators, and we discuss the strategies that the seller can adopt to increase his revenue.

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Publisher Info
Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 176.

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Date of creation: 01 Mar 2007
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Handle: RePEc:sef:csefwp:176

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Related research
Keywords: multi-object auctions; speculation; resale; demand reduction;

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Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions

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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. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
    Other versions:
  3. Sutton, John, 1986. "Non-cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Blackwell Publishing, vol. 53(5), pages 709-24, October. [Downloadable!] (restricted)
  4. Robert J. Weber, 1997. "Making More from Less: Strategic Demand Reduction in the FCC Spectrum Auctions," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 6(3), pages 529-548, 09. [Downloadable!] (restricted)
  5. 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!]
  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. Engelbrecht-Wiggans, Richard & Kahn, Charles M., 1998. "Multi-Unit Pay-Your-Bid Auctions with Variable Awards," Games and Economic Behavior, Elsevier, vol. 23(1), pages 25-42, April. [Downloadable!] (restricted)
  8. Rod Garratt & Thomas Tröger, 2006. "Speculation in Standard Auctions with Resale," Econometrica, Econometric Society, vol. 74(3), pages 753-769, 05. [Downloadable!] (restricted)
    Other versions:
  9. Charles Zhoucheng Zheng, 2002. "Optimal Auction with Resale," Econometrica, Econometric Society, vol. 70(6), pages 2197-2224, November. [Downloadable!] (restricted)
  10. Kagel, John H & Levin, Dan, 2001. "Behavior in Multi-unit Demand Auctions: Experiments with Uniform Price and Dynamic Vickrey Auctions," Econometrica, Econometric Society, vol. 69(2), pages 413-54, March.
  11. Giacomo Calzolari & Alessandro Pavan, 2003. "Monopoly with Resale," Working Papers 2003.20, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  12. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-94, March. [Downloadable!] (restricted)
  13. John A. List & David Lucking-Reiley, 2000. "Demand Reduction in Multiunit Auctions: Evidence from a Sportscard Field Experiment," American Economic Review, American Economic Association, vol. 90(4), pages 961-972, September. [Downloadable!] (restricted)
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  15. Haile, Philip A., 2000. "Partial Pooling at the Reserve Price in Auctions with Resale Opportunities," Games and Economic Behavior, Elsevier, vol. 33(2), pages 231-248, November. [Downloadable!] (restricted)
  16. Noussair, Charles, 1995. "Equilibria in a Multi-object Uniform Price Sealed Bid Auction with Multi-unit Demands," Economic Theory, Springer, vol. 5(2), pages 337-51, March.
  17. 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)
  18. Wilson, Robert, 1979. "Auctions of Shares," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 675-89, November. [Downloadable!] (restricted)
  19. Dan Levin, 2005. "Demand Reduction in Multi-Unit Auctions: Evidence from a Sportscard Field Experiment: Comment," American Economic Review, American Economic Association, vol. 95(1), pages 467-471, March. [Downloadable!]
  20. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November. [Downloadable!] (restricted)
  21. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002. [Downloadable!]
  22. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June. [Downloadable!] (restricted)
  23. Ilan Kremer, 2004. "Underpricing and Market Power in Uniform Price Auctions," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 17(3), pages 849-877. [Downloadable!] (restricted)
    Other versions:
  24. Philippe Jehiel & Benny Moldovanu, 1998. "Auctions with Downstream Interaction," Discussion Papers 1243, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  25. Back, Kerry & Zender, Jaime F, 1993. "Auctions of Divisible Goods: On the Rationale for the Treasury Experiment," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 6(4), pages 733-64. [Downloadable!] (restricted)
  26. Gupta, Madhurima & Lebrun, Bernard, 1999. "First price auctions with resale," Economics Letters, Elsevier, vol. 64(2), pages 181-185, August. [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. Thomas Tröger & Rodney Garratt & Charles Zheng, 2008. "Collusion via Resale," Bonn Econ Discussion Papers bgse20_2008, University of Bonn, Germany. [Downloadable!]
    Other versions:
  2. 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!]
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