Speculation in Standard Auctions with Resale

In standard auctions with symmetric, independent private value bidders resale creates a role for a speculator—a bidder who is commonly known to have no use value for the good on sale. 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

Speculation in Standard Auctions with Resale

We analyze the role resale creates for zero-value bidders, called speculators, in standard auctions with symmetric independent private values buyers. English/second-price auctions always have equilibria with active resale markets and positive profits for a speculator. In first- price/Dutch auctions, the unique equilibrium can involve an active resale market, but is never profitable for a speculator. In all standard auctions, allowing resale can increase the initial seller's revenue and lead to an inefficient allocation. First-price and second-price auctions are not revenue equivalent.first-price, second-price, English, Dutch auctions, speculation, resale, efficiency

Speculation in Second-Price Auctions with Resale

This paper contributes to the literature on second-price auctions with resale. We add speculators---bidders with value zero---to the standard symmetric independent private values environment. There always exists a continuum of inefficient equilibria that are profitable for a speculator. With no reserve price in the initial auction, speculation can enhance the initial seller's expected revenue. On the other hand, speculation can harm the initial seller even if she chooses an optimal reserve price. Our results are valid for English auctions as well.speculation, second-price auction, resale

On potential maximization as a refinement of Nash equilibrium

We specify an adjustment process that converges to the set of potential-maximizing strategy profiles for 3-player cooperation-formation games or n-player cooperation-formation games based on a superadditive characteristic function. Our analysis provides a justification for potential maximization as a refinement of Nash equilibrium in these settings.adjustment process.

On cooperation structures resulting from simultaneous proposals

This paper looks at cooperation structures that result from a strategic game where players make simultaneous proposals for cooperation. We identify cooperation structures that maximize the potential of the game, and show how the outcome of potential maximization depends on the players' Shapley values. We do not assume superadditivity and hence, potential-maximizing strategy profiles do not always involve full cooperation. In cases where full cooperation does result from potential maximization it can be inefficient. An example provides intuition.cooperation formation game

Comparing Sunspot Equilibrium and Lottery Equilibrium Allocations: The Finite Case

Sunspot equilibrium and lottery equilibrium are two stochastic solution concepts for nonstochastic economies. Recent work by Garratt, Keister, Qin, and Shell (in press) and Kehoe, Levine, and Prescott (in press) on nonconvex exchange economies has shown that when the randomizing device is continuous, applying the two concepts to the same fundamental economy yields the same set of equilibrium allocations. In the present paper, we examine economies based on a discrete randomizing device. We extend the lottery model so that it can constrain the randomization possibilities available to agents in the same way that the sunspots model can. Every equilibrium allocation of our generalized lottery model has a corresponding sunspot equilibrium allocation. For almost all discrete randomizing devices, the converse is also true. There are exceptions, however: for some randomizing devices, there exist sunspot equilibrium allocations with no lottery equilibrium counterpart.

Efficient bilateral trade

Can two parties reach an ex-post Pareto efficient trade agreement? The importance of the question was elucidated by Coase (1960), and Myerson and Satterthwaite (1983) provided a commonly accepted negative answer that such agreement is impossible when the parties are privately informed. We show that this negative answer depends on the assumption of quasi-linear preferences: efficient trade is possible if risk- aversion or wealth effects are sufficiently large or if agents’ utility is not too responsive to private information. Under empirically-grounded specifications of risk aversion and elasticity of trade, two parties can trade efficiently despite substantial asymmetry of information

Which Bank is the "Central" Bank? An Application of Markov Theory to the Canadian Large Value Transfer System

We use a method similar to Google's PageRank procedure to rank banks in the Canadian Large Value Transfer System (LVTS). Along the way we obtain estimates of the payment processing speeds for the individual banks. These differences in processing speeds are essential for explaining why observed daily distributions of liquidity differ from the initial distributions, which are determined by the credit limits selected by banks.Payment, clearing, and settlement systems