TY - JOUR
T1 - Revenue and efficiency effects of resale in first-price auctions
AU - Hafalir, Isa
AU - Krishna, Vijay
N1 - Funding Information:
This research was supported by a grant from the National Science Foundation (SES-0752931) and by the Auctions Center (CAPCP) at Penn State. We thank Mihai Manea and two referees for helpful comments.
PY - 2009/9/20
Y1 - 2009/9/20
N2 - We study first-price auctions in a model with asymmetric, independent private values. Asymmetries lead to inefficient allocations, thereby creating a motive for resale after the auction is over. In our model, resale takes place via monopoly pricing-the winner of the auction makes a take-it-or-leave-it offer to the loser. Our goal is to compare equilibria of the first-price auction without resale (FPA) with those of the first-price auction with resale (FPAR). For the three major families of distributions for which equilibria of the FPA are available in closed form, we show that resale possibilities increase the revenue of the original seller. We also show by example that, somewhat paradoxically, resale may actually decrease efficiency.
AB - We study first-price auctions in a model with asymmetric, independent private values. Asymmetries lead to inefficient allocations, thereby creating a motive for resale after the auction is over. In our model, resale takes place via monopoly pricing-the winner of the auction makes a take-it-or-leave-it offer to the loser. Our goal is to compare equilibria of the first-price auction without resale (FPA) with those of the first-price auction with resale (FPAR). For the three major families of distributions for which equilibria of the FPA are available in closed form, we show that resale possibilities increase the revenue of the original seller. We also show by example that, somewhat paradoxically, resale may actually decrease efficiency.
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U2 - 10.1016/j.jmateco.2008.04.004
DO - 10.1016/j.jmateco.2008.04.004
M3 - Article
AN - SCOPUS:70349730331
SN - 0304-4068
VL - 45
SP - 589
EP - 602
JO - Journal of Mathematical Economics
JF - Journal of Mathematical Economics
IS - 9-10
ER -