Asymmetric Auctions with Resale
Isa Emin Hafalir
Carnegie Mellon University - David A. Tepper School of Business
Penn State University
January 30, 2006
We study equilibria of first- and second-price auctions with resale in a model with independent private values. With asymmetric bidders, the resulting inefficiencies create a motive for post-auction trade. In our basic model, resale takes place via monopoly pricing - the winner of the auction makes a take-it-or-leave-it offer to the loser after updating his prior beliefs based on his winning. We show that a first-price auction with resale has a unique monotonic equilibrium. Our main result is that with resale, the expected revenue from a first-price auction exceeds that from a second-price auction. The results extend to other resale mechanisms: monopsony and, more generally, probabilistic k-double auctions. The inclusion of resale possibilities thus permits a general revenue ranking of the two auctions that is not available when these are excluded.
Number of Pages in PDF File: 39
Keywords: Auctions, Asymmetries, Resale
JEL Classification: D44, D82
Date posted: January 31, 2006
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