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The Impact of Resale on Entry in Second Price Auctions

XiaoGang Che (), Peter Lee () and Yibai Yang ()
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Peter Lee: University of Sydney, Postal: Business School and School of Economics, NSW, 2006, Australia

No 2013-6, Working Papers from University of Alberta, Department of Economics

Abstract: This paper investigates the effect of resale allowance on entry strategies in a second price auction with two bidders whose entries are sequential and costly. We first characterize the perfect Bayesian equilibrium in cutoff strategies. We then show that there exists a unique threshold such that if the reseller's bargaining power is greater (less) than the threshold, resale allowance causes the leading bidder (the following bidder) to have a higher (lower) incentive on entry; i.e., the cutoff of entry becomes lower (higher). We also discuss asymmetric bidders and the original seller's expected revenue.

Keywords: second price auctions; costly participation; sequential entry; resale (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2013-05-01
New Economics Papers: this item is included in nep-com, nep-cta and nep-mic
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Journal Article: The impact of resale on entry in second price auctions (2013) Downloads
Working Paper: The Impact of Resale on Entry in Second Price Auctions (2013) Downloads
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