Auctions with resale and bargaining power

We show that when the weak bidder’s bargaining power in the resale market is weakened, the auctioneer’s revenue from the first-price auction with resale is lower. Using the idea of Coase Theorem, we show that when the resale market is a sequential bargaining model with no commitment, the auctioneer’s revenue is substantially reduced, and the ranking is the opposite of Hafalir and Krishna (2009). We establish a version of the Coase Theorem in the context of the auctions with resale. When Coase Theorem holds, we show that the revenue of the auction with resale is lower than the revenue of the same auction without resale. We also provide the existence and uniqueness of equilibrium for our model of auctions with resale.