Multi-object auctions with resale: Theory and experiment

Abstract

Abstract. We study multi-object auctions in the presence of post-auction trade opportunities among bidders who have either single-or multi-object demand. We focus on two formats: Vickrey auctions where package bidding is possible and simultaneous second-price auctions. We show that, under complementarities, the Vickrey format has an equilibrium where the objects are allocated efficiently at the auction stage whether resale markets are present or not. The simultaneous second-price, on the other hand, leads to inefficiency with or without resale possibility. Our experimental findings show that the possibility of resale in second-price auctions decreases the efficiency rate at the auction stage compared to the no resale case. However, after resale, the efficiency rate in second-price is as high as that of Vickrey auction without resale outcomes in the experiment.Preventing resale neither benefits nor hurts auction revenues in a second-price format. (JEL D44, C72, C91)

Demand Reduction in Multi‐Object Auctions with Resale: An Experimental Analysis

“…For multi‐object auctions, Filiz‐Ozbay et al . () compare Vickrey auction and independent second‐price auctions (where there is no demand reduction), in the presence of complementarities in bidders’ valuations, and focus on the effects of a specific resale mechanism where the auction winner makes take‐it‐or‐leave‐it offers to the losers, separately for each object acquired. In contrast to all previous studies, we consider the effects of a range of post‐auction resale mechanisms, and focus on demand reduction strategies in multi‐object auctions.…”

Multi-Object Auctions with Resale: An Experimental Analysis

“…11 9 All our qualitative results also hold in the presence of complementarities, although bidder S's incentive to reduce demand is lower in this case, if there is a chance that he may not manage to acquire the second unit in the resale market. 1 1 All our results also hold if the resale market is not necessarily e¢ cient -for example, if bidders fail to trade in the resale market with positive, but not too high, probability.…”

Efficiency in auctions with (failed) resale

“…For simplicity, we also assume that bidder W cannot win more than 1 unit in the auction, even if resale is allowed. 7 Our assumption on bidders' valuations ensures that in our experiments bidders know the role they will have in the resale market when they bid in the auction -i.e., whether they will have a chance to buy or sell in the resale market -allowing us to focus on the di¤erent bidding strategies of the two types of bidders and on how these strategies are a¤ected by the possibility of resale. The assumption also implies that bidders know there are gains from trade in the resale market if W wins a unit.…”