Asymmetric Auctions with Resale: An Experimental Study (original) (raw)

2008

Abstract: We study first-and second-price auctions with resale in a model with independent private values. With asymmetric bidders, the resulting inefficiencies create a motive for post-auction trade which, in our model, takes place via monopoly pricing—the winner makes a take-it-or-leave-it offer to the loser. We show (a) a first-price auction with resale has a unique monotonic equilibrium; and (b) with resale, the expected revenue from a first-price auction exceeds that from a second-price auction.

Auctions with Resale : A Survey 1

2017

Recently emerged, auction theory has become a well-established branch of theoretical economics with important practical applications. As the theory progresses, its basic assumptions become the subject of further investigation and thus new directions emerge. Microeconomics in general and auction theory in particular too often assume away aftermarket interactions, which are a common feature of real markets and have a powerful impact on strategies and incentives. Lately, however, a body of literature emerged that incorporates the possibility of resale into game-theoretic analysis of auctions. This paper reviews this literature. It highlights the role of bargaining power on the aftermarket as one of the main issues in this literature. It then reports how standard auction formats – first and second price auctions in particular – compare in terms of the seller’s revenues they generate. Then, this paper shows generalizations of Myerson’s approach to constructing optimal auctions when resal...

Revenue and E¢ ciency Eects of Resale in First-Price Auctions

We study …rst-price auctions in a model with asymmetric, independent pri- vate values. Asymmetries lead to ine¢ cient allocations, thereby creating a mo- tive 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 oer to the loser. Our goal is to compare equilibria of the …rst-price auction without resale (FPA) with those of the …rst-price auction with resale (FPAR). For the three major families of distributions for which equilibria of the FPA are avail- able 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 e¢ ciency.

Revenue and efficiency effects of resale in first-price auctions

2009

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).

Bidding behavior in asymmetric auctions: An experimental study

European Economic Review, 2005

We review an asymmetric auction experiment. Based on Plum (1992) private valuations of the two bidders are independently drawn from distinct but commonly known distributions, one of which stochastically dominating the other. We test the qualitative properties of that model of asymmetric auctions, in particular whether the weak bidder behaves more aggressively than the strong and then test bidders' preference for …rst-vs. second-price auctions.

The Economics of Contingent Re-auctions

2011

We consider an auction environment where an object can be sold with usage restrictions that generate benefits to the seller but decrease buyers' valuations. In this environment, sellers such as the FCC have used "contingent re-auctions," offering the restricted object with a reserve price, but re-auctioning it without restrictions if the reserve is not met. We show that contingent re-auctions

Multiple equilibria in asymmetric first-price auctions

Economic Theory Bulletin, 2014

Maskin and Riley (2003) and Lebrun (2006) prove that the Bayes-Nash equilibrium of …rst-price auctions is unique. This uniqueness requires the assumption that a buyer never bids above his value. We demonstrate that, in asymmetric …rst-price auctions (with or without a minimum bid), the relaxation of this assumption results in additional equilibria that are "substantial."Although in each of these additional equilibria no buyer wins with a bids above his value, the allocation of the object and the selling price may vary among the equilibria. Furthermore, we show that such phenomena can only occur under asymmetry in the distributions of values.

Simple vs Optimal Auctions: An Experimental Investigation

2018

In single object auctions when bidders are asymmetric, the Myersonian optimal auction is di¢ cult to implement because of its complexity and possible discouragement e¤ect on the bidders. In these cases, Hartline and Roughgarden (2009) proposes a simpleauction that revenue approximates the optimal auction. This paper experimentally studies the performance of the simple auction vis-a-vis the optimal auction in terms of revenue generation. Keywords Optimal Auction, Simple Auction, Asymmetric Bidders JEL Classi cation D44, C90 O. P. Jindal Global University. Sonipat Narela Road, Near Jagdishpur Village, Sonipat, Haryana 131001. Email: shraman.banerjee14@gmail.com. yAshoka University. Plot No. 2, Rajiv Gandhi Education City, Sonipat, Haryana, 131029. Email: swagata.bhattacharjee@ashoka.edu.in zWe would like to thank Bhaskar Dutta, Yoram Halevy, Debasis Mishra, Noam Nisan, Tim Salmon, and Dale Stahl for helpful comments and feedback. This is a preliminary version. Do not cite.

First-Price Auctions with Speculative Resale Part I: Optimal Revenue

2014

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 several speculators. 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 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. 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.