Second Price Auctions with Resale Under State Uncertainty

32 Pages Posted: 19 Mar 2014 Last revised: 12 Nov 2015

See all articles by Mehmet Oğuz Karahan

Mehmet Oğuz Karahan

Bogazici University - Center for Research in Corporate Governance & Financial Regulation (CCG)

Tolga Umut Kuzubas

Bogazici University Department of Economics

Date Written: November 11, 2015

Abstract

We study the equilibrium of second-price auctions with resale when the value of the asset is subject to future state uncertainty. We assume bidders differ in their sensitivities toward each state, resulting in alternating orderings of use values. In both complete and incomplete information settings, equilibrium bids are higher than expected use values, equilibrium bidding functions are non-monotone and convex, with a minimum at the median of type distribution. Under incomplete information, the winner of the auction is unable to infer the type of losing bidder with certainty, which can result in scenarios where she cannot capture all surplus.

Keywords: Auctions, Resale, Uncertainty

JEL Classification: D44, D80, G34

Suggested Citation

Karahan, Mehmet Oğuz and Kuzubas, Tolga Umut, Second Price Auctions with Resale Under State Uncertainty (November 11, 2015). Available at SSRN: https://ssrn.com/abstract=2410762 or http://dx.doi.org/10.2139/ssrn.2410762

Mehmet Oğuz Karahan (Contact Author)

Bogazici University - Center for Research in Corporate Governance & Financial Regulation (CCG) ( email )

Boğaziçi University
South Campus
Istanbul, Bebek 34342
Turkey

Tolga Umut Kuzubas

Bogazici University Department of Economics ( email )

Natuk Birkan Building
Bebek
Istanbul, 34342
Turkey

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