Auctions with Options to Re-auction
We examine a dynamic model of English auctions with independent private values. There is a single object for sale and it is not possible for the seller, who has a value of zero for the object, to commit not to sell in the future if a sale is not accomplished today. The seller may be able to commit to a reserve price, or make a cheap-talk announcement of a reserve price and secretly bid for the object herself in order to re-auction it in a later round with a new set of bidders. Bidders are "short-lived" in the sense that at the end of each round all existing bidders vanish and new bidders start arriving. This framework allows us to obtain existing results for one shot-auctions as special cases. This framework also allows us to capture some of the features of thick internet auctions and to obtain some new insights on the role of commitment, on optimal length and on socially optimal reserve prices that are not apparent from a one-shot auction perspective.
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