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The Impact of Resale on Entry in Second Price Auctions

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  • Che, XiaoGang
  • Lee, Peter
  • Yang, Yibai

Abstract

This paper investigates the effect of resale allowance on entry strategies in a second price auction with two bidders whose entries are sequential and costly. We first characterize the perfect Bayesian equilibrium in cutoff strategies. We then show that there exists a unique threshold such that if the reseller's bargaining power is greater (less) than the threshold, resale allowance causes the leading bidder (the following bidder) to have a higher (lower) incentive on entry; i.e., the cutoff of entry becomes lower (higher). We also discuss asymmetric bidders and the original seller's expected revenue.

Suggested Citation

  • Che, XiaoGang & Lee, Peter & Yang, Yibai, 2013. "The Impact of Resale on Entry in Second Price Auctions," Working Papers 2013-07, University of Sydney, School of Economics.
  • Handle: RePEc:syd:wpaper:2123/9029
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    References listed on IDEAS

    as
    1. Rod Garratt & Thomas Tröger, 2006. "Speculation in Standard Auctions with Resale," Econometrica, Econometric Society, vol. 74(3), pages 753-769, May.
    2. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-75, September.
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    Cited by:

    1. Todd R. Kaplan & Shmuel Zamir, 2014. "Advances in Auctions," Discussion Papers 1405, University of Exeter, Department of Economics.
    2. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications,, Elsevier.

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    More about this item

    Keywords

    resale; sequential entry; costly participation; Second price auctions;
    All these keywords.

    JEL classification:

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

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