Auctions versus sequential mechanisms when resale is allowed

Xiaogang Che () and Tilman Klumpp ()
Additional contact information
Xiaogang Che: City University of London
Tilman Klumpp: University of Alberta

Economic Theory, 2023, vol. 75, issue 4, No 9, 1207-1245

Abstract: Abstract We examine the problem of selling an object to a stream of potential buyers with independent private values and participation costs. If the object can be resold in the future, and resellers can make posted price offers, the original seller may prefer to deal with potential buyers sequentially instead of holding an auction. The reason is that resale opportunities compress the dispersion of buyers’ willingness to pay for the object, which lowers the surplus each buyer expects to receive in the auction. This effect may reduce participation in the initial auction to just one buyer, in which case the seller obtains zero revenue. We show that a simple form of sequential mechanism allows the seller to extract positive revenue, and becomes approximately optimal if the resale market is large. Our finding contrasts with the result that sellers usually prefer auctions when resale is not allowed (see Bulow and Klemperer in Am Econ Rev 99(4):1544–1575, 2009).

Keywords: Sequential mechanisms; Auctions; Participation costs; Sequential entry; Resale; D44; G34; L13 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s00199-022-01444-2 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:75:y:2023:i:4:d:10.1007_s00199-022-01444-2

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

DOI: 10.1007/s00199-022-01444-2

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().