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Secret Reserve Prices in a Bidding Model with a Re-Sale Option

  • Horstmann, I.J.
  • LaCasse, C.

This paper presents an auction model in which the seller may choose not to sell in spite of receiving a bid above the announced reserve price. Such behavior is seen frequently in auctions, yet would be suboptimal within most existing models. Here, the seller uses resale to signal information about the object's value that could not be easily communicated via a reserve price announcement. The model predicts that bids for reauctioned objects increase relative to initial bids and that, on average, prices of both reauctioned items and those sold at initial auction rise as delay in reauctioning increases. Copyright 1997 by American Economic Association.

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Paper provided by University of Ottawa, Department of Economics in its series Working Papers with number 9507e.

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Length: 38 pages
Date of creation: 1995
Date of revision:
Handle: RePEc:ott:wpaper:9507e
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