Revenue and efficiency effects of resale in first-price auctions

Isa Hafalir, Vijay Krishna

Research output: Contribution to journalArticlepeer-review

20 Scopus citations

Abstract

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). For the three major families of distributions for which equilibria of the FPA are available 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 efficiency.

Original languageEnglish (US)
Pages (from-to)589-602
Number of pages14
JournalJournal of Mathematical Economics
Volume45
Issue number9-10
DOIs
StatePublished - Sep 20 2009

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Applied Mathematics

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