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The impact of resale on entry in second price auctions

  • Che, XiaoGang
  • Lee, Peter
  • Yang, Yibai

This paper investigates the effect of resale allowance on entry strategies in a second price auction with two bidders whose entries are sequential and costly. We first characterize the perfect Bayesian equilibrium in cutoff strategies. We then show that there exists a unique threshold such that if the reseller’s bargaining power is greater (less) than the threshold, resale allowance causes the leading bidder (the following bidder) to have a higher (lower) incentive on entry; i.e., the cutoff of entry becomes lower (higher). We also discuss asymmetric bidders and the original seller’s expected revenue.

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Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 66 (2013)
Issue (Month): 2 ()
Pages: 163-168

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Handle: RePEc:eee:matsoc:v:66:y:2013:i:2:p:163-168
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505565

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  1. Lebrun, Bernard, 2012. "Optimality and the English and second-price auctions with resale," Games and Economic Behavior, Elsevier, vol. 75(2), pages 731-751.
  2. Guofu Tan & Okan Yilankaya, 2005. "Equilibria in Second Price Auctions with Participation Costs," IEPR Working Papers 05.7, Institute of Economic Policy Research (IEPR).
  3. Isa Hafalir & Vijay Krishna, 2008. "Asymmetric Auctions with Resale," American Economic Review, American Economic Association, vol. 98(1), pages 87-112, March.
  4. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
  5. Marco Pagnozzi, 2007. "Bidding to lose? Auctions with resale," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 1090-1112, December.
  6. Philip A. Haile, 2001. "Auctions with Resale Markets: An Application to U.S. Forest Service Timber Sales," American Economic Review, American Economic Association, vol. 91(3), pages 399-427, June.
  7. McAfee, R. Preston & McMillan, John, 1987. "Auctions with entry," Economics Letters, Elsevier, vol. 23(4), pages 343-347.
  8. Rod Garratt & Thomas Troger, 2004. "Speculation in Standard Auctions with Resale," Microeconomics 0405005, EconWPA.
  9. Tian, Guoqiang & Xiao, Mingjun, 2009. "Vickrey Auctions with Sequential and Costly Participation," MPRA Paper 41203, University Library of Munich, Germany.
  10. 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.
  11. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-75, September.
  12. Cheng, Harrison, 2011. "Auctions with resale and bargaining power," Journal of Mathematical Economics, Elsevier, vol. 47(3), pages 300-308.
  13. Tymofiy Mylovanov & Thomas Tröger, 2009. "Optimal auction with resale—a characterization of the conditions," Economic Theory, Springer, vol. 40(3), pages 509-528, September.
  14. Gupta, Madhurima & Lebrun, Bernard, 1999. "First price auctions with resale," Economics Letters, Elsevier, vol. 64(2), pages 181-185, August.
  15. Zheng, Charles Zhoucheng, 2002. "Optimal Auction with Resale," Staff General Research Papers 12664, Iowa State University, Department of Economics.
  16. Rod Garrat & Thomas Tröger, 2005. "Speculation in Standard Auctions with Resale," Bonn Econ Discussion Papers bgse10_2005, University of Bonn, Germany.
  17. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 72-110, January.
  18. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
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