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Can resale harm the original seller in a second-price auction?

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  • Akyol, Ethem

Abstract

We consider second-price auctions with participation costs and investigate the revenue effects of a resale possibility. There are two potential bidders whose valuations are independently and identically distributed, and each bidder must incur a participation cost to bid in the auction. Due to these costs, there may be a resale opportunity in an otherwise efficient second-price auction. We show that when values are drawn from a uniform distribution, resale increases (decreases) entry of the lower-(higher-)cost bidder and decreases the original seller’s expected revenue.

Suggested Citation

  • Akyol, Ethem, 2021. "Can resale harm the original seller in a second-price auction?," Economics Letters, Elsevier, vol. 203(C).
    • Handle: RePEc:eee:ecolet:v:203:y:2021:i:c:s0165176521001221
    DOI: 10.1016/j.econlet.2021.109845
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    References listed on IDEAS

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    1. Celik, Gorkem & Yilankaya, Okan, 2017. "Resale in second-price auctions with costly participation," International Journal of Industrial Organization, Elsevier, vol. 54(C), pages 148-174.
    2. Hafalir, Isa & Krishna, Vijay, 2009. "Revenue and efficiency effects of resale in first-price auctions," Journal of Mathematical Economics, Elsevier, vol. 45(9-10), pages 589-602, September.
    3. Isa Hafalir & Vijay Krishna, 2008. "Asymmetric Auctions with Resale," American Economic Review, American Economic Association, vol. 98(1), pages 87-112, March.
    4. Xu, Xiaoshu & Levin, Dan & Ye, Lixin, 2013. "Auctions with entry and resale," Games and Economic Behavior, Elsevier, vol. 79(C), pages 92-105.
    5. Akyol, Ethem, 2019. "Effects of resale in second-price auctions with private participation costs," Mathematical Social Sciences, Elsevier, vol. 101(C), pages 6-19.
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    More about this item

    Keywords

    Second-price auctions; Resale; Participation cost; Expected revenue;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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