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How (Not) to Sell Nuclear Weapons

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  • Jehiel, Philippe
  • Moldovanu, Benny
  • Stacchetti, Ennio

Abstract

The authors consider situations where a sale affects the ensuing interaction between potential buyers. These situations are modeled by assuming that an agent who does not acquire the object for sale incurs an identity-dependent externality. The authors construct a revenue-maximizing auction for the seller. They observe that outside options and participation constraints are endogenous; the seller extracts surplus also from agents who do not obtain the auctioned object; and the seller is better-off by not selling at all (while obtaining some payments) if externalities are much larger than valuations. Copyright 1996 by American Economic Association.

Suggested Citation

  • Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-829, September.
    • Handle: RePEc:aea:aecrev:v:86:y:1996:i:4:p:814-29
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