Abstract

We study equilibria of …rst- and second-price auctions with resale in a model with independent private values. With asymmetric bidders, the resulting ine ¢-ciencies create a motive for post-auction trade. In our basic model, resale takes place via monopoly pricing — the winner of the auction makes a take-it-or-leaveit o¤er to the loser after updating his prior beliefs based on his winning. We show that a …rst-price auction with resale has a unique monotonic equilibrium. Our main result is that with resale, the expected revenue from a …rst-price auction exceeds that from a second-price auction. The results extend to other resale mechanisms: monopsony and, more generally, probabilistic k-double auctions. The inclusion of resale possibilities thus permits a general revenue ranking of the two auctions that is not available when these are excluded. 1

Citations