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Efficiency in Auctions with (Failed) Resale

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Abstract

We analyze how the possibility of resale affects efficiency in multi-object uniform-price auctions with asymmetric bidders using a combination of theory and experiments. Our experimental design consists of four treatments that vary the (exogenous) probability that bidders participate in a post-auction resale market, which is implemented as an unstructured bargaining game between bidders. In all treatments, the possibility of resale increases efficiency after the auction, but it also induces demand reduction by high-value bidders during the auction, which reduces auction efficiency. In contrast to what is usually argued, resale does not necessarily increase final efficiency. When there is a low probability of a resale market, final efficiency is actually lower than in an auction without resale. We also analyze the quantitative and qualitative bargaining chat data to provide additional behavioral insights into the functioning of resale markets.

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  • Marco Pagnozzi & Krista J. Saral, 2016. "Efficiency in Auctions with (Failed) Resale," CSEF Working Papers 432, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:432
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    Cited by:

    1. Loertscher, Simon & Marx, Leslie M., 2017. "Auctions with bid credits and resale," International Journal of Industrial Organization, Elsevier, vol. 55(C), pages 58-90.
    2. Marco Pagnozzi & Krista J. Saral, 2019. "Entry by successful speculators in auctions with resale," Experimental Economics, Springer;Economic Science Association, vol. 22(2), pages 477-505, June.

    More about this item

    Keywords

    Efficiency; multi-object auctions; resale; asymmetric bidders; bargaining; economic experiments;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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