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Asymmetric Auctions with Resale

Isa Emin Hafalir

Carnegie Mellon University - David A. Tepper School of Business

Vijay Krishna

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

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Date posted: January 31, 2006  

Suggested Citation

Hafalir, Isa Emin and Krishna, Vijay, Asymmetric Auctions with Resale (January 30, 2006). Available at SSRN: https://ssrn.com/abstract=878787 or http://dx.doi.org/10.2139/ssrn.878787

Contact Information

Isa Emin Hafalir (Contact Author)
Carnegie Mellon University - David A. Tepper School of Business ( email )
5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Vijay Krishna
Penn State University ( email )
Kern 516
University Park, PA 16802-3306
United States
814-863-8543 (Phone)
814-863-4775 (Fax)
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