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The Economics of Contingent Re-Auctions

  • Sandro Brusco


  • Giuseppe Lopomo
  • Leslie M. Marx

We consider an auction environment where an object can be sold with usage restrictions that generate benefits to the seller but decrease buyers' valuations. In this environment, sellers such as the FCC have used "contingent re-auctions," offering the restricted object with a reserve price, but re-auctioning it without restrictions if the reserve is not met. We show that contingent re-auctions are generally neither efficient nor optimal for the seller. We propose an alternative "exclusive-buyer mechanism" that can implement the efficient outcome in dominant strategies. In certain environments, parameters can be chosen so the seller's surplus is maximized across all selling procedures. (JEL D44, D82, H82)

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Paper provided by Stony Brook University, Department of Economics in its series Department of Economics Working Papers with number 08-02.

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Date of creation: Oct 2008
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Handle: RePEc:nys:sunysb:08-02
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