First-Price, Second-Price, and English Auctions with Resale

Abstract

In the independent-private-value model, we allow resale among bidders following a first-price sealed-bid, second-price sealed-bid, or English auction with two bidders. We consider two regimes with regard to the disclosure of the sealed bids: full disclosure and no disclosure. Either the auction winner or the auction loser chooses the resale mechanism. Thanks to three key properties our model shares with the common-value model, we obtain explicit formulas for the equilibria. We circumvent the “ratchet effect,” by “randomizing” every pure equilibrium under no disclosure into an equivalent behavioral equilibrium under full disclosure. We compare the auctioneer’s revenues across auctions and bargaining procedures. We present some nbidder extensions.