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Auctions with resale and bargaining power

  • Cheng, Harrison
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    We show that when the weak bidder’s bargaining power in the resale market is weakened, the auctioneer’s revenue from the first-price auction with resale is lower. Using the idea of Coase Theorem, we show that when the resale market is a sequential bargaining model with no commitment, the auctioneer’s revenue is substantially reduced, and the ranking is the opposite of Hafalir and Krishna (2009). We establish a version of the Coase Theorem in the context of the auctions with resale. When Coase Theorem holds, we show that the revenue of the auction with resale is lower than the revenue of the same auction without resale. We also provide the existence and uniqueness of equilibrium for our model of auctions with resale.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0304406811000814
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    Article provided by Elsevier in its journal Journal of Mathematical Economics.

    Volume (Year): 47 (2011)
    Issue (Month): 3 ()
    Pages: 300-308

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    Handle: RePEc:eee:mateco:v:47:y:2011:i:3:p:300-308
    Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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    1. Rod Garratt & Thomas Troger, 2004. "Speculation in Standard Auctions with Resale," Microeconomics 0405005, EconWPA.
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    8. Lawrence M. Ausubel & Peter Cramton & Raymond J. Deneckere, 2002. "Bargaining with Incomplete Information," Papers of Peter Cramton 02barg, University of Maryland, Department of Economics - Peter Cramton, revised 12 Mar 2001.
    9. Isa Hafalir & Vijay Krishna, 2008. "Asymmetric Auctions with Resale," American Economic Review, American Economic Association, vol. 98(1), pages 87-112, March.
    10. Harrison Cheng & Guofu Tan, 2010. "Asymmetric common-value auctions with applications to private-value auctions with resale," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 45(1), pages 253-290, October.
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    15. Gupta, Madhurima & Lebrun, Bernard, 1999. "First price auctions with resale," Economics Letters, Elsevier, vol. 64(2), pages 181-185, August.
    16. Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
    17. Hafalir, Isa & Krishna, Vijay, 2009. "Revenue and efficiency effects of resale in first-price auctions," Journal of Mathematical Economics, Elsevier, vol. 45(9-10), pages 589-602, September.
    18. Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice
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    19. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
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