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The impact of resale on entry in second price auctions

Listed author(s):
  • 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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File URL: http://www.sciencedirect.com/science/article/pii/S0165489613000334
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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
DOI: 10.1016/j.mathsocsci.2013.04.002
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505565

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  1. Rod Garratt & Thomas Tröger, 2006. "Speculation in Standard Auctions with Resale," Econometrica, Econometric Society, vol. 74(3), pages 753-769, 05.
  2. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-75, September.
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