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Speculation in Second-Price Auctions with Resale

  • Garratt, Rod
  • Troger, Thomas E

This paper contributes to the literature on second-price auctions with resale. We add speculators—bidders with value zero—to the standard symmetric independent private values environment. There always exists a continuum of inefficient equilibria that are profitable for a speculator. With no reserve price in the initial auction, specu-lation can enhance the initial seller’s expected revenue. On the other hand, speculation can harm the initial seller even if she commits to an optimal reserve price. Our results are valid for English auctions as well.

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Paper provided by Department of Economics, UC Santa Barbara in its series University of California at Santa Barbara, Economics Working Paper Series with number qt0bj7w3z6.

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Date of creation: 28 Apr 2003
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Handle: RePEc:cdl:ucsbec:qt0bj7w3z6
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  1. Charles Zhoucheng Zheng, 2002. "Optimal Auction with Resale," Econometrica, Econometric Society, vol. 70(6), pages 2197-2224, November.
  2. Binmore, Ken & Samuelson, Larry, 1999. "Evolutionary Drift and Equilibrium Selection," Review of Economic Studies, Wiley Blackwell, vol. 66(2), pages 363-93, April.
  3. Edlin, Aaron S. & Shannon, Chris, 1998. "Strict Monotonicity in Comparative Statics," Journal of Economic Theory, Elsevier, vol. 81(1), pages 201-219, July.
  4. Giacomo Calzolari & Alessandro Pavan, 2006. "Monopoly with resale," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 362-375, 06.
  5. Jehiel, Philippe & Moldovanu, Benny, 1999. "Resale Markets and the Assignment of Property Rights," Review of Economic Studies, Wiley Blackwell, vol. 66(4), pages 971-91, October.
  6. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 72-110, January.
  7. Larry M. Ausubel & Raymond J. Deneckere, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Levine's Working Paper Archive 201, David K. Levine.
  8. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
  9. 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.
  10. Thomas Troger, 2003. "Speculation in First-Price Auctions with Resale," Microeconomics 0308001, EconWPA.
  11. Haile,P.A., 1999. "Auctions with resale," Working papers 33, Wisconsin Madison - Social Systems.
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