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Speculation in First-Price Auctions with Resale

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  • Thomas Troger

    (University of California Santa Barbara)

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    Abstract

    We analyze first-price auctions with two asymmetric bidders, where the winner can offer the good for resale to the loser. One bidder has a private value for the good, the other bidder - the speculator - has zero value. We show that, independently of the resale market rules, the speculator's expected profit equals zero. Nevertheless, the opportunity for resale can create a role for an active speculator, destroy the efficiency of the auction, and increase the initial seller's expected revenue.

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    File URL: http://128.118.178.162/eps/mic/papers/0308/0308001.pdf
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    Bibliographic Info

    Paper provided by EconWPA in its series Microeconomics with number 0308001.

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    Date of creation: 04 Aug 2003
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    Handle: RePEc:wpa:wuwpmi:0308001

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    Web page: http://128.118.178.162

    Related research

    Keywords: first-price auction; speculation; resale;

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    References

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    1. Gupta, Madhurima & Lebrun, Bernard, 1999. "First price auctions with resale," Economics Letters, Elsevier, vol. 64(2), pages 181-185, August.
    2. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-94, March.
    3. Garratt, Rod & Troger, Thomas E, 2003. "Speculation in Second-Price Auctions with Resale," University of California at Santa Barbara, Economics Working Paper Series qt0bj7w3z6, Department of Economics, UC Santa Barbara.
    4. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 72-110, January.
    5. Haile,P.A., 1999. "Auctions with resale," Working papers 33, Wisconsin Madison - Social Systems.
    6. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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    Cited by:
    1. Garratt, Rod & Troger, Thomas E, 2003. "Speculation in Second-Price Auctions with Resale," University of California at Santa Barbara, Economics Working Paper Series qt0bj7w3z6, Department of Economics, UC Santa Barbara.
    2. Garratt, Rod & Tröger, Thomas, 2005. "Speculation in Standard Auctions with Resale," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 42, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

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