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Speculation in First-Price Auctions with Resale

Author

Listed:
  • Thomas Troger

    (University of California Santa Barbara)

Abstract

We analyze first-price auctions with two asymmetric bidders, where the winner can offer the good for resale to the loser. One bidder has a private value for the good, the other bidder - the speculator - has zero value. We show that, independently of the resale market rules, the speculator's expected profit equals zero. Nevertheless, the opportunity for resale can create a role for an active speculator, destroy the efficiency of the auction, and increase the initial seller's expected revenue.

Suggested Citation

  • Thomas Troger, 2003. "Speculation in First-Price Auctions with Resale," Microeconomics 0308001, EconWPA.
  • Handle: RePEc:wpa:wuwpmi:0308001
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mic/papers/0308/0308001.pdf
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    References listed on IDEAS

    as
    1. Garratt, Rod & Troger, Thomas E, 2003. "Speculation in Second-Price Auctions with Resale," University of California at Santa Barbara, Economics Working Paper Series qt0bj7w3z6, Department of Economics, UC Santa Barbara.
    2. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-194, March.
    4. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
    5. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 72-110, January.
    6. Gupta, Madhurima & Lebrun, Bernard, 1999. "First price auctions with resale," Economics Letters, Elsevier, vol. 64(2), pages 181-185, August.
    7. Haile,P.A., 1999. "Auctions with resale," Working papers 33, Wisconsin Madison - Social Systems.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Rod Garratt & Thomas Troger, 2003. "Speculation in Second-Price Auctions with Resale," Levine's Working Paper Archive 506439000000000246, David K. Levine.
    2. Rod Garratt & Thomas Tröger, 2006. "Speculation in Standard Auctions with Resale," Econometrica, Econometric Society, vol. 74(3), pages 753-769, May.

    More about this item

    Keywords

    first-price auction; speculation; resale;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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