First-Price Auctions with Speculative Resale Part I: Equilibrium and Optimal Revenue
نویسندگان
چکیده
In this paper, we investigate the model of speculative resale in auctions. Resale (or secondary trade) is allowed for each bidder, but in equilibrium we show that there is only speculative resale. We consider a standard rst-price auction in the rst stage with symmetric independent private values (IPV) among N bidders and one speculator. In the second stage there is resale among the bidders. The winner in the rst stage auction uses an optimal mechanism to sell the object to the losing bidders. We establish a supermodularity property without assuming monotonicity or symmetry in bidding. We show the equilibrium bidding function of the regular bidders to be symmetric and increasing. We give a simple computable equilibrium solution and prove it to be unique. The Myerson (1981) revenue formula is extended to our model with speculative resale. Revenue monotonicity holds, and the Bulow-Klemperer (1996) argument favoring participation rather than the choice of optimal reservation price is also valid here with even greater force. The speculators active participation enhances the seller revenue, but for optimal revenue, the seller should prevent speculative resale by setting a su¢ ciently high reservation price. Thus rst-price auction provides an implementation of optimal auctions with a unique equilibrium, while allowing speculative resale.
منابع مشابه
Asymmetric Common Value Auctions with Applications to Auctions with Resale
We study a model of common value auctions in which bidders’ private information are independently and asymmetrically distributed. We provide two sufficient conditions under which a first-price auction generates higher revenue than a second-price auction (for a selected equilibrium). A necessary condition is given for this revenue-ranking result to hold in general. We illustrate that in a first-...
متن کاملAuctions with entry and resale
We study how resale affects auctions with costly entry in a model where bidders possess twodimensional private information signals: entry costs and valuations. We establish the existence of symmetric entry equilibrium and identify sufficient conditions under which the equilibrium is unique. Our analysis suggests that the opportunity of resale affects both entry and bidding, and, in particular, ...
متن کاملAsymmetric Common-Value Auctions with Applications to Private-Value Auctions with Resale
We study a model of common-value auctions with two bidders in which bidders’ private information are independently and asymmetrically distributed. We provide three sufficient conditions under which we can determine whether a first-price auction generates higher or lower revenue than a second-price auction (for a selected equilibrium). Necessary conditions are given for the revenue-ranking resul...
متن کاملAuctions with Entry and Resale: The Case with Continuous Heterogeneous Entry Costs
We study how resale affects auctions with costly entry in a model where bidders possess twodimensional private information signals: entry costs and valuations. We establish the existence of symmetric entry equilibrium and identify sufficient conditions under which the equilibrium is unique. Our analysis suggests that the opportunity of resale induces motivation for both speculative entry and ba...
متن کاملThe Spite Motive and Equilibrium Behavior in Auctions
We study auctions where bidders have independent private values but attach a disutility to the surplus of rivals, and derive symmetric equilibria for first-price, second-price, English, and Dutch auctions. We find that equilibrium bidding is more aggressive than standard predictions. Indeed, in second-price auctions it is optimal to bid above one’s valuation; that is, bidding “frenzies” can ari...
متن کامل