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Speculation in Standard Auctions with Resale

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Author Info

  • Rod Garratt

    (University of California, Santa Barbara)

  • Thomas Troger

    (University of California, Santa Barbara)

Abstract

We analyze the role resale creates for zero-value bidders, called speculators, in standard auctions with symmetric independent private values buyers. English/second-price auctions always have equilibria with active resale markets and positive profits for a speculator. In first- price/Dutch auctions, the unique equilibrium can involve an active resale market, but is never profitable for a speculator. In all standard auctions, allowing resale can increase the initial seller's revenue and lead to an inefficient allocation. First-price and second-price auctions are not revenue equivalent.

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File URL: http://128.118.178.162/eps/mic/papers/0405/0405005.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Microeconomics with number 0405005.

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Length: 52 pages
Date of creation: 20 May 2004
Date of revision:
Handle: RePEc:wpa:wuwpmi:0405005

Note: Type of Document - pdf; pages: 52
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Web page: http://128.118.178.162

Related research

Keywords: first-price; second-price; English; Dutch auctions; speculation; resale; efficiency;

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References

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  1. Maskin, Eric & Tirole, Jean, 1992. "The Principal-Agent Relationship with an Informed Principal, II: Common Values," Econometrica, Econometric Society, vol. 60(1), pages 1-42, January.
  2. Klemperer, Paul, 1999. "Auction Theory: a Guide to the Literature," CEPR Discussion Papers 2163, C.E.P.R. Discussion Papers.
  3. Rothkopf, Michael H & Teisberg, Thomas J & Kahn, Edward P, 1990. "Why Are Vickrey Auctions Rare?," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 94-109, February.
  4. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  5. Thomas Troger, 2003. "Speculation in First-Price Auctions with Resale," Microeconomics 0308001, EconWPA.
  6. 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.
  7. Jehiel, Philippe & Moldovanu, Benny, 2001. "Efficient Design with Interdependent Valuations," Econometrica, Econometric Society, vol. 69(5), pages 1237-59, September.
  8. Rod Garratt & Thomas Troger, 2004. "Speculation in Standard Auctions with Resale," Microeconomics 0405005, EconWPA.
  9. Rod Garratt & Thomas Troger, 2003. "Speculation in Second-Price Auctions with Resale," Game Theory and Information 0305003, EconWPA.
  10. Giacomo Calzolari & Alessandro Pavan, 2003. "Monopoly with Resale," Working Papers 2003.20, Fondazione Eni Enrico Mattei.
    • Giacomo Calzolari & Alessandro Pavan, 2004. "Monopoly with Resale," Discussion Papers 1393, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Giacomo Calzolari & Alessandro Pavan, 2005. "Monopoly with Resale," Discussion Papers 1405, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Gupta, Madhurima & Lebrun, Bernard, 1999. "First price auctions with resale," Economics Letters, Elsevier, vol. 64(2), pages 181-185, August.
  13. 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.
  14. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-29, September.
  15. Charles Zheng, 2000. "An Optimal Auction When Resale Cannot Be Prohibited," Discussion Papers 1303, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 72-110, January.
  17. Rod Garrat & Thomas Tröger, 2005. "Speculation in Standard Auctions with Resale," Bonn Econ Discussion Papers bgse10_2005, University of Bonn, Germany.
  18. Haile,P.A., 1999. "Auctions with resale," Working papers 33, Wisconsin Madison - Social Systems.
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