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First-price auctions with resale: the case of many bidders

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  • Virag, Gabor

Abstract

If agents engage in resale, it changes bidding in the initial auction. Resale offers extra incentives for bidders with lower valuations to win the auction. However, if resale markets are not frictionless, then use values affect bidding incentives, and stronger bidders still win the initial auction more often than weaker ones. I consider a first price auction followed by a resale market with frictions, and con�rm the above statements. While intuitive, our results differ from the two bidder case of Hafalir and Krishna (2008): the two bidders win with equal probabilities regardless of their use values. The reason is that they face a common (resale) price at the relevant margin, a property that fails with more than two bidders. Numerical simulations show that asymmetry in winning probabilities increases in the number of bidders, and in large markets resale loses its e¤ect on allocations.

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  • Virag, Gabor, 2009. "First-price auctions with resale: the case of many bidders," MPRA Paper 17094, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:17094
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    Cited by:

    1. Jun, Byoung Heon & Wolfstetter, Elmar G., 2015. "Auctions with imperfect commitment when the reserve may signal the cost to re-auction," International Journal of Industrial Organization, Elsevier, vol. 40(C), pages 11-21.
    2. Isa Hafalir & Musab Kurnaz, 2019. "Discriminatory auctions with resale," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 173-189, December.
    3. Mehmet Oguz Karahan & Tolga Umut Kuzubas, 2014. "Auctions with Resale under State Uncertainty," Working Papers 2014/02, Bogazici University, Department of Economics.
    4. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications,, Elsevier.
    5. Celik, Gorkem & Yilankaya, Okan, 2017. "Resale in second-price auctions with costly participation," International Journal of Industrial Organization, Elsevier, vol. 54(C), pages 148-174.
    6. Alex Gershkov & Flavio Toxvaerd, 2013. "On seller estimates and buyer returns," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 1(1), pages 47-55, May.
    7. Ding, Wei & Fan, Cuihong & Wolfstetter, Elmar G., 2013. "Horizontal mergers with synergies: Cash vs. profit-share auctions," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 382-391.
    8. Byoung Heon Jun & Elmar G. Wolfstetter, 2013. "Auctions with imperfect commitment when the reserve may serve as a signal," Discussion Paper Series 1304, Institute of Economic Research, Korea University.
    9. Lorentziadis, Panos L., 2016. "Optimal bidding in auctions from a game theory perspective," European Journal of Operational Research, Elsevier, vol. 248(2), pages 347-371.
    10. Zhang, Jun & Wang, Ruqu, 2013. "Optimal mechanism design with resale via bargaining," Journal of Economic Theory, Elsevier, vol. 148(5), pages 2096-2123.
    11. Virág, Gábor, 2016. "Auctions with resale: Reserve prices and revenues," Games and Economic Behavior, Elsevier, vol. 99(C), pages 239-249.
    12. Xiaogang Che & Tilman Klumpp, 2023. "Auctions versus sequential mechanisms when resale is allowed," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(4), pages 1207-1245, May.

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    More about this item

    Keywords

    auction; resale;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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