Monopoly with resale
This paper examines the intricacies associated with the design of revenue-maximizing mechanisms for a monopolist who expects her buyers to resell. We consider two cases: resale to a third party who does not participate in the primary market and inter-bidder resale, where the winner resells to the losers. To influence the resale outcome, the monopolist must design an allocation rule and a disclosure policy that optimally fashion the beliefs of the participants in the secondary market. Our results show that the revenue-maximizing mechanism may require a stochastic selling procedure and a disclosure policy richer than the simple announcement of the decision to trade.
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Volume (Year): 37 (2006)
Issue (Month): 2 (06)
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