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Resale and Bundling in Auctions

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

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Abstract

Allowing resale in multi-object auctions increases bidders. incentives to jointly reduce demand, because resale increases low-value bidders’ willingness to pay and reduces high-value bidders’ willingness to pay. Therefore (unlike in single-object auctions), resale may reduce the seller’s revenue in multi-object auctions. However, we show that, under reasonable conditions, allowing resale and bundling the objects on sale are “complement strategies” for the seller – by bundling and allowing resale the seller earns a higher revenue than by selling the objects separately and/or not allowing resale. We also analyze how resale affects a bidder’s incentive to unilaterally reduce demand, and we show why allowing resale may reduce efficiency.

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Publisher Info
Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy in its series CSEF Working Papers with number 186.

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Date of creation: 01 Nov 2007
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Handle: RePEc:sef:csefwp:186

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Related research
Keywords: multi-object auctions resale bundling 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
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  1. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
    Other versions:
  2. Anton, James J & Yao, Dennis A, 1992. "Coordination in Split Award Auctions," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 681-707, May. [Downloadable!] (restricted)
  3. Palfrey, Thomas R, 1983. "Bundling Decisions by a Multiproduct Monopolist with Incomplete Information," Econometrica, Econometric Society, vol. 51(2), pages 463-83, March. [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. Grimm, Veronika & Riedel, Frank & Wolfstetter, Elmar, 2003. "Low price equilibrium in multi-unit auctions: the GSM spectrum auction in Germany," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1557-1569, December. [Downloadable!] (restricted)
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  6. Marco Pagnozzi, 2004. "Bidding to Lose? Auctions with Resale," CSEF Working Papers 116, Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy. [Downloadable!]
  7. Rod Garratt & Thomas Tröger, 2006. "Speculation in Standard Auctions with Resale," Econometrica, Econometric Society, vol. 74(3), pages 753-769, 05. [Downloadable!] (restricted)
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  8. Charles Zhoucheng Zheng, 2002. "Optimal Auction with Resale," Econometrica, Econometric Society, vol. 70(6), pages 2197-2224, November. [Downloadable!] (restricted)
  9. 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.
  10. Marco Pagnozzi, 2007. "Should Speculators Be Welcomed in Auctions?," CSEF Working Papers 176, Centre for Studies in Economics and Finance (CSEF), University of Salerno, Italy. [Downloadable!]
  11. 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)
  12. 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.
  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. Wilson, Robert, 1979. "Auctions of Shares," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 675-89, November. [Downloadable!] (restricted)
  15. 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)
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  16. 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)
  17. Giacomo Calzolari & Alessandro Pavan, 2006. "Monopoly with Resale," RAND Journal of Economics, The RAND Corporation, vol. 37(2), pages 362-375, Summer.
    Other versions:
    • Giacomo Calzolari & Alessandro Pavan, 2004. "Monopoly with Resale," Discussion Papers 1393, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    • Giacomo Calzolari & Alessandro Pavan, 2005. "Monopoly with Resale," Discussion Papers 1405, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    • Giacomo Calzolari & Alessandro Pavan, 2003. "Monopoly with Resale," Working Papers 2003.20, Fondazione Eni Enrico Mattei. [Downloadable!]
  18. Gupta, Madhurima & Lebrun, Bernard, 1999. "First price auctions with resale," Economics Letters, Elsevier, vol. 64(2), pages 181-185, August. [Downloadable!] (restricted)
  19. Richard J. Gilbert & Paul Klemperer, 2000. "An Equilibrium Theory of Rationing," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 1-21, Spring.
    Other versions:
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