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Resale and Bundling in Auctions

Allowing resale in multi-object auctions increases bidders. incentives to jointly reduce demand, because resale increases low-value bidders’ willingness to pay and reduces high-value bidders’ willingness to pay. Therefore (unlike in single-object auctions), resale may reduce the seller’s revenue in multi-object auctions. However, we show that, under reasonable conditions, allowing resale and bundling the objects on sale are “complement strategies” for the seller – by bundling and allowing resale the seller earns a higher revenue than by selling the objects separately and/or not allowing resale. We also analyze how resale affects a bidder’s incentive to unilaterally reduce demand, and we show why allowing resale may reduce efficiency.

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Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 186.

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Date of creation: 01 Nov 2007
Date of revision:
Publication status: published in International Journal of Industrial Organization, 27(6), 667-678, 2009
Handle: RePEc:sef:csefwp:186
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  1. McAdams, David, 2007. "Adjustable supply in uniform price auctions: Non-commitment as a strategic tool," Economics Letters, Elsevier, vol. 95(1), pages 48-53, April.
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  18. Isa Hafalir & Vijay Krishna, 2008. "Asymmetric Auctions with Resale," American Economic Review, American Economic Association, vol. 98(1), pages 87-112, March.
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  20. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
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  24. Back, Kerry & Zender, Jaime F, 1993. "Auctions of Divisible Goods: On the Rationale for the Treasury Experiment," Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 733-64.
  25. Marco Pagnozzi, 2007. "Bidding to lose? Auctions with resale," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 1090-1112, December.
  26. Peter Cramton, 2002. "Spectrum Auctions," Papers of Peter Cramton 01hte, University of Maryland, Department of Economics - Peter Cramton, revised 16 Jul 2001.
  27. Rod Garratt & Thomas Troger, 2004. "Speculation in Standard Auctions with Resale," Microeconomics 0405005, EconWPA.
  28. Catherine D. Wolfram, 1998. "Strategic Bidding in a Multiunit Auction: An Empirical Analysis of Bids to Supply Electricity in England and Wales," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 703-725, Winter.
  29. Christopher Avery & Terrence Hendershott, 2000. "Bundling and Optimal Auctions of Multiple Products," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 483-497.
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  31. Haile, Philip A., 2000. "Partial Pooling at the Reserve Price in Auctions with Resale Opportunities," Games and Economic Behavior, Elsevier, vol. 33(2), pages 231-248, November.
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