Auctions with Resale Market and Asymmetric Information

Rodrigo Harrison, Rodrigo Muñoz and Felipe Varas

No 332, Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile.

Abstract: In this paper we study the role of resale opportunities in secondary markets over the bidding process in first and second price auctions. This trade opportunity arises owing to the presence of two factors. On the one hand, after receiving the object, the winner obtains new information about the object's value and on the other hand, the winner may suffer a liquidity shock that force him to sell the object regardless of his valuation. The buyer in the secondary market, however, does not know if the good is being sold because the new information reveals bad news regarding the object's valuation, or because a liquidity shock affected the seller. Our results show that revenue equivalence still holds, and bids are usually lower than those observed in the absence of liquidity shocks.

Keywords: Auctions; resale market; adverse selection (search for similar items in EconPapers)
JEL-codes: D44 L1 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-cta and nep-mic
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.economia.uc.cl/docs/doctra/dt-332.pdf (application/pdf)

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:ioe:doctra:332

Access Statistics for this paper

More papers in Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile. Contact information at EDIRC.
Bibliographic data for series maintained by Jaime Casassus (jcasassus@uc.cl).