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Optimal Auction with Resale

Charles Zheng

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: This paper investigates the design of seller-optimal auctions when winning bidders can attempt to resell the good. In that case, the optimal allocation characterized by Myerson (1981) cannot be achieved without resale. I find a sufficient and necessary condition for sincere bidding given the possibility of resale. In two-bidder cases, I prove that the Myerson allocation can be achieved under standard conditions supplemented with two assumptions. With three or more bidders, achieving the Myerson allocation is more difficult. I prove that it can be implemented in special cases. In those cases, the Myerson allocation is generated through a sequence of resale auctions, each optimally chosen by a reseller. (This paper was not from my dissertation.)

Date: 2002-11-01
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Published in Econometrica, November 2002, vol. 70 no. 6, pp. 2197-2224

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