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Speculation in Standard Auctions with Resale

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Author Info
Rod Garratt
Thomas Tröger

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Abstract

In standard auctions resale creates a role for a speculator-a bidder who is commonly known to have no use value for the good on sale. We study this issue in environments with symmetric independent private-value bidders. For second-price and English auctions the efficient value-bidding equilibrium coexists with a continuum of inefficient equilibria in which the speculator wins the auction and makes positive profits. First-price and Dutch auctions have an essentially unique equilibrium, and whether or not the speculator wins the auction and distorts the final allocation depends on the number of bidders, the value distribution, and the discount factor. Speculators do not make profits in first-price or Dutch auctions. Copyright The Econometric Society 2006.

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File URL: http://hdl.handle.net/10.1111/j.1468-0262.2006.00681.x
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Publisher Info
Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 74 (2006)
Issue (Month): 3 (05)
Pages: 753-769
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Handle: RePEc:ecm:emetrp:v:74:y:2006:i:3:p:753-769

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rod Garratt & Thomas Tröger, 2005. "Speculation in Standard Auctions with Resale," Discussion Papers 42, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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  2. Charles Zheng, 2000. "An Optimal Auction When Resale Cannot Be Prohibited," Discussion Papers 1303, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  3. Thomas Troger, 2003. "Speculation in First-Price Auctions with Resale," Microeconomics 0308001, EconWPA. [Downloadable!]
  4. Rothkopf, Michael H & Teisberg, Thomas J & Kahn, Edward P, 1990. "Why Are Vickrey Auctions Rare?," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 94-109, February. [Downloadable!] (restricted)
  5. Rod Garratt & Thomas Troger, 2003. "Speculation in Second-Price Auctions with Resale," Game Theory and Information 0305003, EconWPA. [Downloadable!]
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  6. Lawrence M. Ausubel & Peter Cramton, 1998. "The Optimality of Being Efficient," Papers of Peter Cramton 98wpoe, University of Maryland, Department of Economics - Peter Cramton, revised 18 Jun 1999. [Downloadable!]
  7. repec:att:wimass:19199933 is not listed on IDEAS
  8. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  9. Giacomo Calzolari & Alessandro Pavan, 2003. "Monopoly with Resale," Working Papers 2003.20, Fondazione Eni Enrico Mattei. [Downloadable!]
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  10. Klemperer, P., 1999. "Auction Theory: a Guide to the Literature," Economics Papers 1999-w12, Economics Group, Nuffield College, University of Oxford.
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  11. Haile, Philip A., 2000. "Partial Pooling at the Reserve Price in Auctions with Resale Opportunities," Games and Economic Behavior, Elsevier, vol. 33(2), pages 231-248, November. [Downloadable!] (restricted)
  12. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 72-110, January. [Downloadable!] (restricted)
  13. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-29, September. [Downloadable!] (restricted)
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  14. Gupta, Madhurima & Lebrun, Bernard, 1999. "First price auctions with resale," Economics Letters, Elsevier, vol. 64(2), pages 181-185, August. [Downloadable!] (restricted)
  15. Philippe Jehiel & Benny Moldovanu, 1996. "Strategic Nonparticipation," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 84-98, Spring. [Downloadable!] (restricted)
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  16. Jehiel, Philippe & Moldovanu, Benny, 2001. "Efficient Design with Interdependent Valuations," Econometrica, Econometric Society, vol. 69(5), pages 1237-59, September.
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  17. Maskin, Eric & Tirole, Jean, 1992. "The Principal-Agent Relationship with an Informed Principal, II: Common Values," Econometrica, Econometric Society, vol. 60(1), pages 1-42, January. [Downloadable!] (restricted)
  18. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bernard Lebrun, 2008. "First-Price, Second-Price, and English Auctions with Resale," Working Papers 2008_06, York University, Department of Economics. [Downloadable!]
  2. Subir Bose & George Deltas, 2007. "Exclusive Versus Non-exclusive Dealing in Auctions with Resale," Economic Theory, Springer, vol. 31(1), pages 1-17, April. [Downloadable!] (restricted)
  3. Hannu Vartiainen, 2009. "Auction Design without Commitment," Discussion Papers 44, Aboa Centre for Economics. [Downloadable!]
    Other versions:
  4. Alexander Matros & Andriy Zapechelnyuk, 2008. "Optimal fees in internet auctions," Review of Economic Design, Springer, vol. 12(3), pages 155-163, September. [Downloadable!] (restricted)
    Other versions:
  5. Rod Garratt & Thomas Tröger, 2005. "Speculation in Standard Auctions with Resale," Discussion Papers 42, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  6. Marco Pagnozzi, 2007. "Resale and Bundling in Auctions," CSEF Working Papers 186, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
  7. Alexander Matros & Andriy Zapechelnyuk, 2009. "Competing Auction Houses," Discussion Papers 17, Kyiv School of Economics. [Downloadable!]
  8. Marco Pagnozzi, 2007. "Should Speculators Be Welcomed in Auctions?," CSEF Working Papers 176, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
  9. Ng, Travis & Chong, Terence & Xin, Du, 2009. "The Value of Superstitions," MPRA Paper 13575, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  10. Garratt, Rod & Troger, Thomas & Zheng, Charles Zhoucheng, 2007. "Collusion via Resale," Staff General Research Papers 12829, Iowa State University, Department of Economics. [Downloadable!]
    Other versions:
  11. Virag, Gabor, 2009. "First-price auctions with resale: the case of many bidders," MPRA Paper 17094, University Library of Munich, Germany. [Downloadable!]
  12. Giuseppe Dari-Mattiacci & Sander Onderstal & Francesco Parisi, 2009. "Seeking rents in the shadow of Coase," Public Choice, Springer, vol. 139(1), pages 171-196, April. [Downloadable!] (restricted)
    Other versions:
  13. Thomas Tröger, 2004. "The Impact of Resale on 2-Bidder First-Price Auctions where One Bidder's Value is Commonly Known," Bonn Econ Discussion Papers bgse25_2004, University of Bonn, Germany. [Downloadable!]
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