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Monopoly with Resale

Author

Listed:
  • Giacomo Calzolari
  • Alessandro Pavan

Abstract

This paper examines the intricacies associated with the design of revenue-maximizing mechanisms for a monopolist who expects her buyers to resell. We consider two cases: resale to a third party who does not participate in the primary market and inter-bidder resale, where the winner resells to the losers. To influence the resale outcome, the monopolist must design an allocation rule and a disclosure policy that optimally fashion the beliefs of the participants in the secondary market. Our results show that the revenue-maximizing mechanism may require a stochastic selling procedure and a disclosure policy richer than the simple announcement of the decision to trade.

Suggested Citation

  • Giacomo Calzolari & Alessandro Pavan, 2005. "Monopoly with Resale," Discussion Papers 1405, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:1405
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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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