A losing bidder can still purchase the prize from the winner after the auction. We show why a strong bidder may prefer to drop out of the auction before the price has reached her valuation and acquire the prize in the aftermarket: a strong bidder may be in a better bargaining position in the aftermarket if her rival won at a relatively low price. So it can be common knowledge that, in equilibrium, a weak bidder will win the auction and, even without uncertainty about relative valuations, resale will take place. The possibility of reselling to a strong bidder attracts weak bidders to participate in the auction and raises the seller’s revenue.

Bidding to lose? Auctions with resale / Pagnozzi, Marco. - In: RAND JOURNAL OF ECONOMICS. - ISSN 0741-6261. - STAMPA. - 38:4(2007), pp. 1090-1112.

Bidding to lose? Auctions with resale

PAGNOZZI, MARCO
2007

Abstract

A losing bidder can still purchase the prize from the winner after the auction. We show why a strong bidder may prefer to drop out of the auction before the price has reached her valuation and acquire the prize in the aftermarket: a strong bidder may be in a better bargaining position in the aftermarket if her rival won at a relatively low price. So it can be common knowledge that, in equilibrium, a weak bidder will win the auction and, even without uncertainty about relative valuations, resale will take place. The possibility of reselling to a strong bidder attracts weak bidders to participate in the auction and raises the seller’s revenue.
2007
Bidding to lose? Auctions with resale / Pagnozzi, Marco. - In: RAND JOURNAL OF ECONOMICS. - ISSN 0741-6261. - STAMPA. - 38:4(2007), pp. 1090-1112.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11588/108490
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