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Speculation in Standard Auctions with Resale

Author

Listed:
  • Rod Garratt
  • Thomas Tröger
Abstract
In standard auctions resale creates a role for a speculator-a bidder who is commonly known to have no use value for the good on sale. We study this issue in environments with symmetric independent private-value bidders. For second-price and English auctions the efficient value-bidding equilibrium coexists with a continuum of inefficient equilibria in which the speculator wins the auction and makes positive profits. First-price and Dutch auctions have an essentially unique equilibrium, and whether or not the speculator wins the auction and distorts the final allocation depends on the number of bidders, the value distribution, and the discount factor. Speculators do not make profits in first-price or Dutch auctions. Copyright The Econometric Society 2006.

Suggested Citation

  • Rod Garratt & Thomas Tröger, 2006. "Speculation in Standard Auctions with Resale," Econometrica, Econometric Society, vol. 74(3), pages 753-769, May.
    • Handle: RePEc:ecm:emetrp:v:74:y:2006:i:3:p:753-769
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    File URL: http://hdl.handle.net/10.1111/j.1468-0262.2006.00681.x
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    References listed on IDEAS

    as
    1. Rod Garratt & Thomas Tröger, 2006. "Speculation in Standard Auctions with Resale," Econometrica, Econometric Society, vol. 74(3), pages 753-769, May.
    2. Charles Zheng, 2000. "An Optimal Auction When Resale Cannot Be Prohibited," Discussion Papers 1303, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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    4. Thomas Troger, 2003. "Speculation in First-Price Auctions with Resale," Microeconomics 0308001, University Library of Munich, Germany.
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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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